Avoiding the Tax Landmines of Remote Work Policies
*** Guest Blog by Robert Steinhardt: CPA and Partner – Carr, Riggs & Ingram CPAs and Advisors ***
As the pandemic subsides, many employers across the country are now contemplating their employees’ desires for continued flexibility in their work environment. With stay-at-home orders and shutdowns seemingly a memory, employees are still asking for the ability to work from home, and to keep key employees, those employers may have no choice but to allow it in some form. In short, work-from-home is not going away any time soon. Whether an employee works from home a few days a week or full time, employers must be mindful of where those work-from-home hours are being logged. If not, employers could be opening themselves up to costly tax compliance issues.
In many cases, those tax compliance issues come up when an employee chooses to relocate to an area where the employer didn’t previously have a physical location. With the patchwork of state & local tax laws across the country, having a worker in a location where the company didn’t previously have a physical location could create what tax professionals call “nexus.” Having tax “nexus” could potentially require an employer to file sales, payroll and income taxes in a new state or city, surely not the desired effect of allowing a worker to work remotely and one that could prove very costly.
So the question then becomes, how do employers avoid being blindsided by their employees, while still allowing them to work remotely? Here are a few tips for keeping in compliance.
- Establish and communicate clear guidelines about remote work, including acceptable locations that your employees may work.
- Set up a remote work approval process for existing employees that allows the employer (or their CPA) to research the tax ramifications before allowing an employee to work in a particular location.
- Ask your payroll provider to notify you if any of your employees request address changes.
- Send a quarterly or bi-annual email to all remote employees asking them to confirm their work location.
- Check employee expense reports for concentrations of expenses in locations other than their resident state/city.
During the pandemic many states and cities were less aggressive in enforcing their “nexus” policies as a result of temporary telecommuting arrangements, but as the economy gets back to full capacity, and states and cities search for revenue to fill their budget deficits, most experts agree that the states will begin to get more aggressive once again in the search for tax dollars. With many large companies going to flexible or completely remote work arrangements, one thing is clear: this issue will continue to provide challenges for employers for years to come.
About Robert Steinhardt, CPA and Partner – Offering more than 15 years of experience, Bob specializes in providing tax research, planning, and compliance services to individual, corporate, and pass-through entity clients within a variety of industries. He is well-versed in the taxation of closely-held businesses, including businesses with multi-state tax issues. Bob is a member of the American Institute of Certified Public Accountants (AICPA) and the Georgia Society of Certified Public Accountants (GSCPA).
Carr, Riggs, & Ingram CPAs and Advisors is a top 20 nationally ranked CPA firm offering innovative tax, accounting, audit, consulting, and advisory services derived from “big firm” expertise and delivered locally.
