When a mobile employee relocates across borders, whether internationally or domestically within the US, they soon discover that their tax situation has become far more complex as a result of the move. If that employee is moving from a low-tax location to a high-tax one, they could potentially face a major increase in tax liability. Additionally, they may also encounter tax issues related to the sale or rental of their home, moving expenses for state reporting purposes, state residency issues, and a number of other issues they may not be prepared to handle on their own.
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As companies adjust to the new reality of work and reassess their mobility programs, there is an opportunity for them to examine the costs associated with running their mobility programs and explore innovative solutions. We are witnessing a renewed interest in mobility as companies seek to adopt the best structure for their business and employees. While non-traditional forms such as remote and hybrid work are becoming more prevalent, there is also renewed interest in both short and long-term assignments.
It happens all the time. Your company has a mobile workforce spread out over multiple jurisdictions, and you realize you need help with the mobility tax complexities that come with having employees working outside their usual work location. So, you reach out to a well-known large accounting firm offering an impressive list of services, technology, and experts, and who may already be doing your corporate tax work. You know they can handle the number of mobile employees you have, and you’re pretty sure they won’t mess things up because they’ve been doing this for decades. But somewhere along the line you realize this provider may be a bit too big for you and you aren’t getting the high-level of service you expected.
Let’s face it, many people find taxes to be intimidating, time consuming, and confusing—why else would so many people procrastinate when it comes to filing their taxes? Then, add in the intricacies when taxpayers are dealing with multiple taxing jurisdictions—due to an international transfer, international assignment, business travel, or even remote work—and the complexities skyrocket. When employees are working outside of their Home location, delivering timely communications can go a long way in managing risks and providing an exceptional employee experience—helping you retain top talent and providing essential duty of care to your workforce. Below, we outline key items you should be discussing with your remote workers, business travelers, and/or international transferees or assignees.
As we all struggle to keep up with the impact of COVID-19, the changing rules, and the lack of guidelines, we wanted to share a few tips that have been beneficial for our clients with mobility programs. Here is a mobility tax checklist of considerations to think about as you work to determine next steps for your mobility program and your mobile employees.
It may seem counterintuitive to a US citizen or permanent resident (i.e., a green card holder) who has just taken a new international job, that most will still be required to file US federal income tax returns after relocating. In addition to filing income tax returns, mobile employees may also have other filing obligations including estate or gift tax returns, estimated tax payments, and foreign bank account reports.