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.
- Tip 1: POLICY – Develop and communicate company policy regarding US stimulus and other global stimulus schemes that tax equalized assignees would have received had their income not included assignment related compensation.
- Tip 2: POLICY – Develop and communicate company policy regarding US stimulus and other global stimulus schemes that transferees would have received had their income not included transfer related compensation such as shipment of household goods.
- Tip 3: POLICY – Develop and communicate company policy regarding US stimulus and other global stimulus schemes that tax equalized assignees received due to the fact that their income was reduced below the eligibility threshold as a result of their assignment (i.e., Sec 911 exclusion in US reducing AGI below eligibility threshold.)
- Tip 4: INTERNATIONAL PAYROLL (tax equalized) – For tax equalized assignees who repatriated, review US payroll set-up to switch from hypothetical tax withholdings to actual withholdings.
- Tip 5: INTERNATIONAL PAYROLL (state) – Review state tax withholding set-up in cases where state tax residency was broken due to the assignment. If they repatriated, state withholdings might need to be reinstated.
- Tip 6: INTERNATIONAL PAYROLL (shadow) – For assignments where shadow payroll was operated, review whether shadow payroll is a continued requirement in case of repatriation.
- Tip 7: DOMESTIC PAYROLL – For US domestic employees who live in one state but commuted to another state prior to shelter in place orders, review state income tax withholding set-up (e.g., CT and NJ residents who worked in NY.)
- Tip 8: DOMESTIC PAYROLL – Begin to reach out to all US domestic employees to confirm the state where they are currently sheltering in place. Some may have “moved” to vacation homes in other states or younger employees may have moved back home with their parents.
- Tip 9: REMOTE WORKERS – For employees “stuck” in a country other than their normal country of employment, develop a company policy regarding whether employees will be allowed to work remotely, or be required to use PTO / unpaid leave.
- Tip 10: REMOTE WORKERS – For employees working remotely from a country other than their normal country of employment, review income tax, payroll, and social security tax implications with your mobility tax services provider.
- Tip 11: COST REVIEW – For relocations and repatriations that take place during the pandemic, review additional relocation costs incurred to see if any can be excluded from the employee’s income under IRC Sec 139, reducing the tax gross-up cost for the company.
- Tip 12: COST PROJECTIONS – Review existing cost projections and accruals for impacted assignments/transfers to notify the business of any cost increases or reductions.
Before taking action, ensure you communicate with not only your mobility tax services provider and other strategic vendors (such as your relocation management company, immigration firm, and payroll provider) but also your internal teams, such as HR, finance, corporate tax, legal, and immigration.
As always, we are here to help. If you have questions about your mobile workforce and the potential tax and/or social security impacts of COVID-19, schedule a call with our team to discuss your specific situation. This is truly an unprecedented time, and only by working together, will we be able to resolve issues and keep businesses running as normal as possible.