December 4, 2020

2020 Year-end Tax Planning: Helpful Steps and Tips!

2020 has been an unprecedented year to say the least. As the end of the year is quickly approaching, now is the perfect time to begin planning for next year!

Early in the year, many countries issued shelter-in-place (SIP) orders and travel restrictions to minimize the spread of COVID-19 with some exceptions for essential travel and workers. Companies that could continue operations adjusted overnight to accommodate employees working remotely. Several employees decided to shelter in place outside their home jurisdictions or return early from international assignment. 

Following these guidelines, some countries decided to relax residency rules to consider individuals who were displaced or sheltering in place. While this is good news, rules still vary by jurisdiction, state, and country.

To help your year-end planning, we have put together a list of steps you can take right now to evaluate tax and payroll in this challenging new landscape we are all facing. Ensure your tax, immigration, and mobility teams are working closely together to address these next steps.

Step 1: Locate where your employees are and how long they have been in each jurisdiction.
Step 2: Evaluate payroll reporting requirements for each of the jurisdictions.
Step 3: Review your current remote workforce policy. If you don’t have a protocol set, it might be a good time to implement one. Global Mobility Tax recently wrote an article to help form a ‘Work from Anywhere’ HR policy.

Following Steps 1 and 2, you will need to ensure compliance in each jurisdiction when employees are on an international assignment or starting a new international assignment. By completing a year-end compensation review and establishing accurate payroll, you’ll minimize the potential need for corrected year-end tax statements (i.e. the U.S. W-2).

Below are a few more tips to help further guide payroll compliance:

• Review reportable wages in each location. Examples of these are base wages, equity, bonuses, 401K (pension) deductions, medical and dental deductions.
• Account for assignment allowances paid throughout the year. More specifically, tallying moving allowances (household goods, shipping, airfare), housing allowances, cost of living adjustment (COLA), temporary living expenses, and auto allowances.
• Analyze assignment related tax benefits. For instance, hypothetical tax deduction, tax equalization settlement payment, host country income and taxes, home country income and taxes, estimated tax preparation costs, and tax gross-ups from the home and host country.
• Consider expenses related to the COVID-19 pandemic and potential tax relief (i.e. travel expenses, temporary living expenses, workspace improvement expenses, and teleworking expenses).

By assessing payroll for each jurisdiction and correctly reporting, you can avoid unnecessary penalties and fines. This also helps create a simple assignment process for both the company and the employee.

We hope these helpful steps and tips for your year-end planning bring you some peace of mind! If you need more help planning for the 2020 year-end, reach out to the GLOMO Tax Team at info@glomotax.com. We are here to help when you need us.