Blog Post

Thoughts on the New Federal Tax Policy – From Compliance to Corporate Rates

Guest Author Robert Digby serves as CEO and Board Member for Apex HCM. Robert brings to Apex 25 years of experience in the payroll, time and attendance, and human resources industry.

Apex HCM CEO Weighs In

 

For weeks, the new federal tax plan has dominated headlines, with media pundits nationwide weighing in on the potential effects for companies and consumers alike. Signed into law by President Trump on December 22, the tax bill represents the most far-reaching overhaul of the United States tax system in decades, drawing both praise and criticism from various groups for reducing the corporate tax from 35 percent to 21 percent – its lowest point since 1939 – and changing individual tax rates.

If you’re a business owner or leader, you’re undoubtedly anxious for clarification of just what the bill will mean for your firm, its clients and its bottom line both immediately and long-term. With 25 years of experience in the payroll, time and attendance, and human resources industry, Apex HCM CEO Robert Digby offers his insights on two key factors – implications on company tax compliance and managing a company with a lower tax bill.

 

The state of change

As the man at the helm of a company specializing in helping client businesses most effectively manage their own human capital and payroll, Digby’s foremost focus is on assuring full compliance with requirements of the new tax plan. This means effectively managing all changes including accurately interpreting and calculating taxes and correctly processing payroll for every employee of each client.

Federal tax rates will reduce individual tax rates to 10, 12, 22, 24, 32, 35, and 37 percent. Guidance from the IRS is that payroll providers will receive rates in January for February implementation. From a compliance standpoint, the Federal rates changes will be easy to manage for payroll providers.

“Compliance is without a doubt the most top-of-mind issue for Apex HCM moving into 2018 – so important that we are actively recruiting for a tax compliance officer” Digby says.

In the meantime, Apex HCM employs seasoned software engineers specifically tasked with implementing state and federal compliance changes as they begin to take effect. The company also licenses proprietary data resources that constantly monitor and report on Federal and state tax law changes. “We are going the distance to assure full compliance so neither we, nor our clients, are caught unaware at any point” Digby assures.

 

Potential windfalls

The key business provision is the significant reductions in the corporate tax rate from 35 to 21 percent and excludes corporations from the AMT tax, providing business owners the opportunity for a lower tax bill. Tax breaks for businesses can mean a profit windfall. The million-dollar question however, and the factor that will set the smartest business leaders up for the greatest success and allow them to distance themselves from the competition, is just what to do with that profit boost.

For publicly traded corporations, profit windfalls likely will be directed to activities such as stock dividend increases, stock repurchases, and merger and acquisition activity. “It’s simply the nature of that public beast,” Digby says. “Increasingly, dividend payments and stock buybacks both raise stock prices.”

Of course, such short-term actions may well provide only short-lived benefits for companies. If profit increases afforded by the new tax plan are managed wisely, it’s the privately-held companies that may enjoy more lasting success. That’s because business leaders of privately held companies may have more longer-term latitude to reinvest the windfall back into employees and infrastructure, Digby explains.

“The highest payback investments are in growth initiatives such as product innovation, sales and marketing, and their people” he says. “Providing tools for workers to do their jobs more efficiently and sell more is a win-win. Take care of employees who take care of customers and you’re sure to see business growth, customer retention and employee retention, all of which are key to long-term success.”

Apex HCM clients, and payroll service bureaus in general, are privately held companies and, as such, have an unprecedented opportunity to make substantial reinvestments in their businesses and their people. Let us help you take full advantage of the benefits of the new tax plan moving into 2018 and beyond. If you’re a current client, rest assured we’re on top of coming changes and your assigned agents will be in touch. Not yet an Apex HCM client? Call 877-750-2739 or visit us online to request a product demo so you can see firsthand how we can help streamline, manage and grow your business.