Return to NASPP Blog
The NASPP Blog

Year-End Preparation for Mobility Compliance

Subscribe to the NASPP Blog

Year-End Preparation for Mobility Compliance

By Marlene Zobayan, Rutlen Associates

Year end can be busy and stressful for many companies and, as we are heading into the middle of October at the time of this writing, it will be here sooner than later. There are several year-end tasks stock administration departments can undertake related to mobility compliance that could minimize employee questions and W-2Cs in 2022. These should be undertaken in conjunction with, and not as a replacement of, your regular year-end equity compensation processes.

Survey Your Employees

Many employees moved across state or international borders to work remotely from another location while their offices remained shuttered during the pandemic. Many companies have not yet fully reopened their offices, and employees may continue to be working remotely from a state or country other than that shown on the payroll records. Typically, but not always, taxation depends on where the work is physically performed. Employees do not always review pay slips during the year, and often only notice the state(s) that income was reported to when looking at their Form W-2.

Surveying employees during fall generally allows adequate time for a company to take corrective measures before year-end. Even before the pandemic, one of my clients would ask their employees to verify mobility data before year-end so the team had time to make any adjustments before closing out the year. 

Align Internal Information on Mobility

Alignment of mobility information across all of a company’s systems including HRIS, payroll, and stock administration is important. Unfortunately for some companies, this may be a manual undertaking. Ideally cross-checking mobility data should take place on a regular basis, say, before each RSU vest or on a quarterly basis. If the data has not been reviewed during the year, at a minimum, a year-end review is necessary. This should allow time for the company to correct any errant information and help reduce the number of Forms W-2C the company may have to do next year.

Those companies whose HRIS, payroll, and stock administration systems are integrated may find this an easier task to undertake. By surveying the employees, as noted above, to verify the HRIS data, unreported updates can be dealt with before the year end.

Check Whether Each Payroll Has Recorded All Equity Income

It is always a good idea to check that each payroll has captured all equity income for each pertinent participant, even for those employees who are not mobile. The country allocation for mobile employees should be included in this confirmation.

Review Data Imports

Review whether the imported data into your stock administration system still makes sense. For many companies, the biggest change to mobility compliance in the last two years was the unprecedented number of remote workers. If your stock administration system uses work location to determine taxability, review whether employees are actually working from the office work location that is listed in their HRIS record. Some HRIS systems show the work location as the office location the individual is tagged to, but they may actually be working from their home location that may be in another state or country.

Companies may need to revise their HRIS policies on how they record work location, start using home location for taxation purposes, or add a remote office field in order to properly identify the tax withholding required for remote workers. Make sure to coordinate a change with the payroll, tax, and HRIS teams.

Review De Minimis Limits for Income Allocation

I am a big fan of practical de minimis limits. Once a (then) potential client told me she had allocated $2.25 of income between two countries, reaffirming my approach. Most companies pick an income amount, some a tax amount, others a number of shares amount to set their de minimis thresholds. If the allocation is below the de minimis level, then there is no allocation across jurisdictions but instead the income is assigned to the current country or state.

Now is a good time to review your de minimis limits to see if they still make sense. For example, one of my clients had a 50-share limit below which they did not allocate the income across countries or states. This worked well initially as their share price was $25 a share. However, as their stock price increased, this practice led to large amounts being left unallocated, resulting in unnecessary risk and exposure.

Implement or Review the Remote Work Policy

By now all companies that can or will allow remote work should have implemented or be actively implementing a remote work policy. At a minimum such policies should include

  • Where employees are allowed to work from (e.g., state of employment only, anywhere in the United States, anywhere the company has an existing entity, etc.).
  • How long employees can work elsewhere before seeking approval. (Be sure that your remote work policy is not so strict as to force employees to seek approval before checking emails during vacation.)
  • The approval process (including the stakeholders required to provide the approvals). Each stakeholder should have their internal checklist of considerations before deciding whether to approve the remote work.
  • Timelines required to have remote work approved (e.g., employees must submit a request at least two months before the planned move).

A robust remote work policy reduces the company’s risk to exposure in a range of areas, including employer withholding and reporting obligations, corporate tax, labor law, data privacy, securities laws, foreign exchange, or workers compensation, as well as IP security.

Start Planning For 2022

Mobility compliance for many companies is an iterative process. Companies typically start with their biggest exposure(s) and widen the compliance net going forward.

For 2022, it will be especially important for those companies that, in the past, had focused on global mobility to expand compliance to state mobility. The movement of remote workers across state lines has been extensively covered in the media; many states and some localities have introduced related legislation. We are already seeing state enforcement actions with the personal income tax filings, including freezing personal tax refunds pending a review of taxpayer identity, tax domicile, and work location.

Additional Resources

Modern Mobility: Multijurisdictional Tax Compliance in the Age of Covid and Remote Working

State Mobility Issues for Equity Compensation Professionals
 

Headshot of Marlene ZobayanMarlene Zobayan is a partner at Rutlen Associates LLC, a boutique consulting firm helping companies with their global equity plans and/or mobile employees.

To learn how other companies manage mobility compliance, don’t miss Marlene’s session “The Mobility and Compliance Balancing Act” at the 29th Annual NASPP Conference.

About Us

The National Association of Stock Plan Professionals is the largest and oldest professional association for the stock and executive compensation community, with over two decades of leadership providing expert resources, education and other benefits for our more than 6,000 members across 32 affiliated chapters.

NASPP

P.O. Box 21639 Concord, CA 94521-0639 Telephone: (925) 685-9271 Fax: (925) 930-9284

©NASPP 2019, All Rights Reserved.