If you’re sending employees on temporary domestic assignments, it’s a good idea to have a policy for those moves. Unfortunately, our Annual Mobility Survey revealed that only 37% of companies have a formal policy in place to manage short-term assignments. The danger here is that managing domestic temporary relocations on an ad-hoc basis exposes your company to increased compliance risks because you’re less likely to accurately track the employee’s time in the destination location or withhold appropriate taxes for that time period.
So a domestic temporary assignment policy is a good idea. But what benefits do you offer?
My recommendation is to include temporary living, return trips, travel expenses, tax gross-up and miscellaneous allowances. To enhance tax compliance, many policies state that employees are expected to maintain housing in the home location and it is assumed that the employee will be returning to the original location at the end of the assignment. If the employee does not maintain a home location residence, the company may regard the move as permanent from a tax perspective.
Under Canadian tax rules, non‐resident companies who send their employees to Canada are required to comply with a substantial administrative burden. This applies even if the employee is in Canada for a relatively short period of time.
This compliance burden applies even if the employee would otherwise not be subject to personal tax in
Canada on those earning (because the employee resides in a country with which Canada has a Tax Treaty).
The Canada Revenue Agency (CRA) expects non‐resident employers to register and obtain a number with them so that as employers they can remit the appropriate withholding tax. As well, the individual employee must obtain an identification number from CRA. The employee is then expected to file a Canadian personal tax return claiming a refund of payroll taxes withheld on the basis that he or she is entitled to relief under a Tax Treaty.
There is the ability for employers to obtain waivers to not withhold. However, the waiver has to be applied for in advance in respect of specific employees and is only for a specific period of time. This has proven to be inefficient and cumbersome and it is only available on an administrative basis which has often led to arbitrary results.
The following tips can help you improve the overall process to boost compliance and reduce or eliminate late filings and W-2C amendments that will inevitably cost you more time, money and sanity.
10. While it’s still fresh in your mind, make a list of the things that worked well in preparing the 2014 year-end and what needs to be addressed for next year. Even if you only had to do one W-2C, why chance that the one mistake could be for a senior level executive? Bottom line: There’s always room for improvement.
Latin America has become a hotbed of talent deployment activity. But with great opportunities come equally great challenges. In this podcast, we’ll examine what the majority of respondents to our recent Latin America Mobility survey indicated as their greatest challenge: managing payroll and tax compliance for employees being relocated into this region.
Our subject matter experts include Andrés López-Llamozas, Manager of International Tax & Compensation, and Laura Levenson, Director of our global consulting practice.
You can listen using the audio player below, or by downloading the episode here.
All signs are pointing toward a recovering real estate market. In fact, the National Association of Realtors (NAR) announced in August that existing home sales reached their highest level in six-and-a-half years, while the median price showed nine consecutive months of double-digit year-over-year increases. That bodes well for workforce mobility, since when the market is healthy, buyer reluctance subsides.
Complementing this upswing, recent Worldwide ERC data indicates that projections for both current employee and new hire transfer activity are positive. More than half of respondents to a benchmarking survey conducted earlier this year at ERC’s National Relocation Conference anticipated an increase in the number of mobile employees in the upcoming year, compared to only 8 percent who expected a decrease.
In light of these trends, it’s a good idea to check your home sale program to see if it needs a tune-up. A competitive home sale program is one of your company’s most effective tools for recruiting the right talent and mobilizing employees, provided it has the right measures in place to ensure that it isn’t overly generous.
Mobility’s Law Blog notes that the IRS, in response to rising fuel costs, has incrhttp://www.blogger.com/img/blank.gifeased standard mileage rates.
Taking effect July 1, 2011, the new standard mileage rate for business will be 55.5 cents per mile, up from 51 cents per mile, and the standard rate for moving will be 23.5 cents per mile, up from 19 cents per mile. The rate for use of a vehicle for charity is fixed by statute at 14 cents per mile.
This marks the third time in six years that the IRS has changed rates mid-year, each time in response to a spike in gas prices.
Companies that relocate employees should incorporate these new rates into their reimbursement programs for transferees. However, as Worldwide ERC points out, if your company uses the business rate, or some rate higher than the rate for moving, to reimburse transferees for travel at the time they move, the excess over 23.5 cents per mile will be taxable.
Corrosive drywall can be an issue for some relocating homeowners. According to ERC’s Mobility LawBlog, a new IRS ruling allows for a casualty loss for affected homeowners:
Under the new procedures announced, IRS will not challenge claims that losses qualify as casualty losses under section 165 if they are caused by corrosive drywall. “Corrosive drywall” is defined for this purpose as drywall identified as problem drywall under a two-step process published in January of 2010 by the Consumer Product Safety Commission and HUD.
The IRS also provided rules for the amount and timing of the casualty loss deduction. The amount of the deduction is generally the amount paid for repair or replacement of damaged components, and may be taken in the year payments are made. Taxpayers who paid for repairs or replacements in prior years may file claims for refund. However, if the taxpayer has a pending claim against someone else for reimbursement through property insurance, litigation, or otherwise, or intends to pursue reimbursement, the taxpayer may only claim a current deduction for 75% of the loss. Thereafter, the loss will be adjusted depending on the outcome of the pursuit of reimbursement. If the taxpayer succeeds in obtaining 100% reimbursement, then the amount already claimed as a casualty loss will be treated as income in the year of recovery.
For more info, check the official document at the IRS’ website.
This link is provided for informational purposes only. Any questions from relocating employees should be directed to the employee’s attorney or accountant.
When it comes to running cost projections for international moves, companies can usually make a fairly accurate estimate of such compensation components as base salary, bonus and the relocation cost.
The part that they typically can’t estimate accurately, according to Stewart McCardle, WRRI’s Director of International Compensation and Finance, is the home and host tax calculation, which can represent between 25 to 35 percent of the total cost of the assignment.
If the taxes aren’t filed and reported correctly, the cost can be even higher—not just in terms of fines and penalties, but also risks of being closely scrutinized by local governments, which will require companies to be absolutely perfect where taxes are concerned going forward.
In fact, in most cases, once companies run afoul of the local government, they’ll have to assign a dedicated person to watch over the tax component to make sure it’s being done right, which can further drain resources. Little surprise, then, that most companies outsource cost projection preparation to avoid tax-related concerns.
Preparing year-end tax reporting for your company’s international assignees is a difficult process by itself; having to do it twice due to errors can be downright painful, not to mention expensive when you factor in possible penalties.
With your 2009 year-end reporting already completed—hopefully—now’s the time to start planning for a pain-free 2010. The following ten tips can help you improve the overall process to boost tax compliance and reduce or eliminate late filings and W-2C amendments that will inevitably cost you more time, money and sanity.
10. While it’s still fresh in your mind, make a list of the things that worked well in preparing the 2009 year-end and what needs to be addressed for next year. Even if you only had to do one W-2C, why chance that the one mistake could be for a senior level executive? Bottom line: There’s always room for improvement.
9. Ask your assignment administration provider and your expatriate tax firm to create a similar list, with their perspectives on what worked and what didn’t.
8. Same for the individuals in your overseas offices who are responsible for providing data for the year-end process.
7. Meet with your assignment administration provider and your expatriate tax firm to begin planning for 2010. Review successes and challenges and the reason for any W-2Cs from the previous year. Assess any anticipated changes to your process or technology. Develop a project plan and a responsibility list to assign accountability for critical tasks. This will encourage collaboration and efficient teamwork.
6. Consider collecting data quarterly (which would make year-end “just another quarter”) or even monthly, if possible. Document your timeline and cut-off dates and distribute it to key constituents.
5. Consider uploading collected and reviewed data quarterly. Many governments require reporting on a more timely basis than annually.
4. Review security protocols for the way data is passed between overseas offices, vendors and payroll.
3. Consider consolidating payment sources, which would make data collection that much easier.
2. Review data as it is collected throughout the year. This will help you catch things like exceptions to policy that might be paid in the host location.
1. Start now! Ideally, planning for next year should begin as soon as the prior year is finalized.
Tis the season of giving, but the IRS is sticking to what it does best–taking away. Beginning January 1, 2010, new rates will go into effect that reduce the deductible costs of using an automobile for business to 50 cents per mile, down from 55 cents in 2009. Of particular interest to relocating employees and their employers, the deductible costs of using an auto for moving will also drop from 24 cents to 16.5 cents per mile. According to the IRS, these reduced rates–the lowest since 2005–are primarily reflective of a decrease in the costs of fuel.
As Worldwide ERC Tax Counsel Peter Scott points out, companies should be reminded that “if they reimburse transferees for use of an automobile in moving at a higher rate than 16.5 cents per mile in 2010, they will need to include the excess in the employees’ wages.”