From Mobility

Concur Fusion Microforum

Tax Risks Are A Key Issue For Concur Fusion Attendees

Last month, hundreds of Concur clients and partners convened in Las Vegas for three days of workshops, panels, and roundtable discussions about managing the travel challenges created by employees on the go. As a Concur partner, Monaeo led discussions on how companies can best manage the tax risks created by their business travelers.

The Global Business Travel Association predicts that business travel spending in the U.S. alone will grow 3.2% in 2016. Business travel means growth for companies – but it can also mean costly tax exposures.

Every time company employees cross state or country borders they can create tax liabilities. That’s because each jurisdiction has its own unique set of rules for when non-resident workers are required to pay taxes. In New York, for example, a company is responsible for withholding payroll taxes for non-resident employees who work in the state for more than 14 days in the calendar year.

For Fusion attendees, tax compliance was a big issue. At a microforum on tax risks, Monaeo co-founder Nishant Mittal led a group discussion of how companies are tackling this issue – and the challenges they are facing. As we listened to participants tell stories of the pain that their travel and finance departments were experience because of tax risks, a few patterns emerged:

Companies of all sizes are facing this issue

One attendee spoke about how her company had recently undergone a state audit. The company wasn’t large compared to many Concur clients – in fact, it had fewer than 500 employees – but it was a consulting firm where many employees spent the majority of their time on the road. The audit had cost the firm significant funds, but the employee was equally upset about the drain on her team’s time. “I have a spreadsheet with 50 tabs that I use to keep track of this,” she explained. Not only were such manual methods time-consuming, she had to be vigilant about expensive errors that could arise from a single mistyped number.

It’s not just New York

It’s unquestionable that New York pioneered the widespread withholding tax audit. However, as technology advances and companies increasingly have digital records, more and more states are following suit. We heard stories of companies being audited not just in New York, but also by Connecticut, Philadelphia, Georgia, California, and numerous other states and localities.

The fees and penalties can continue after the audit is finished

One attendee discussed how her company was still paying fees and penalties years after the audit. Companies may also find themselves being audited in subsequent years. Audits can also “spread” – often a state audit of one company will lead to audits of that company’s primary partners or vendors.

What can travel managers do when confronted with these risks? The first step for any company is to understand your risk. For those companies that use Concur, existing travel and expense data can be a rich source of information. Once you understand where you have exposures and how large those exposures are, then your company is well-armed to manage and reduce those tax risks.

Interested in learning more about how Monaeo’s Risk Analyzer can quickly and accurately quantify your tax exposures? You can request a free consultation here here.

grandcentra

Compass Magazine Outlines Risks of Business Travel and How Monaeo Can Help

“Hungry for revenue, governments tax time spent inside their borders.” 

Compass Magazine has published a feature by Charles Wallace on the growing compliance risks that business travel creates for companies. We were delighted to see Monaeo featured as a leading solution helping business travelers and Fortune 1000 companies move towards compliance.

In recent years, authorities have begun closely scrutinizing business travelers and the tax exposures that they create when spending time within the borders of a country or, domestically, within other states. Soon, writes Wallace, it will be even harder to fly under the radar. More than 100 countries have joined The Global Forum on Transparency and Exchange of Information for Tax Purposes. The forum is working towards automated exchange of immigration reports, hotel stays and airline reservations, providing authorities with the data they need to catch non-compliant firms and travelers.

Wallace points out that now companies are harnessing technology to help travelers and their employers also access that same data, so that they can be compliant and be better prepared to defend against audits. The article highlighted Monaeo’s mobile app as a solution catching on in the market, used by Fortune 1000 industry leaders across verticals.

Monaeo users have a range of data sources to choose from when deciding how to document their travel across state and country lines. In addition to user-friendly mobile, tablet and laptop apps, travelers can also leverage automated analysis of travel and expense reports or simply input their location by hand. It turns out that most executives prefer the option that Compass spotlighted: our mobile app, which does the work on the user’s behalf.

Monaeo is first and foremost a technology company, with 100% of our resources are devoted to building the best, most intuitive and robust software on the market. Monaeo’s independence from tax advisory services means that we don’t squeeze additional revenue out of customers through billable hours, or use our app as a gateway to selling additional services. It’s this laser focus on product design that has led to Monaeo’s best-in-breed data analytics and unique built-in privacy protections.

The full article in Compass Magazine can be found here.

Want to stay up-to-date on the news affecting business travelers? Sign up for our newsletter and receive access to the latest research from leading tax and law advisors.

Passport with Map

The Law That Could Put Millions of Americans’ Passports In Jeopardy

Written on January 20, 2016 by Natalie Boatner

Americans living abroad have a new cause for worry when they file their 2015 tax returns: making a mistake could cost them their passports. For over eight million Americans living abroad, compliance with the Foreign Account Tax Compliance Act (FATCA) has created headaches since 2010. Now a piece of new legislation called the Fixing America’s Surface Transportation, or FAST, act has many Americans contemplating relinquishing their U.S. citizenship for fear of financial or criminal penalties imposed by the IRS.

Critics have long argues that FATCA’s reporting requirements are unrealistically complex and disadvantage Americans abroad. FATCA targets non-compliance by American taxpayers abroad but it relies mainly on individual reporting by taxpayers and on reporting by foreign financial institutions regarding taxpayers’ holdings.

The FAST act increases the potential penalties for expats who fail to comply with FATCA. The long document has two important provisions buried inside its tax code. These two provisions mean that the IRS can now impact the denial, renewal, or attaining of a U.S. passport.

The first passport provision gives the U.S. Secretary of State the power to revoke or deny the application for or renewal of a passport if the IRS identifies the taxpayer as seriously delinquent. The second provision gives the same power to the Secretary of State if the applicant fails to provide a valid, correct social security number. If a passport was issued, it can be revoked if the invalid or incorrect social security number was provided willfully, recklessly, or negligently.

The problem lies in the definitions of the terms “seriously delinquent,” and “recklessly, or negligently.” Under the provisions, seriously delinquent means any outstanding federal tax debt exceeding $50,000. This includes interest and penalties, and is actually fairly easy to achieve among American expats. Recklessly and negligently are under the discretion of the IRS and State Department to define on a case-by-case basis.

For American expats and foreign nationals abroad already struggling with international taxes under FATCA, FAST is likely going to make things more complicated. It is of the utmost importance to fill out your passport paperwork carefully, as even minor errors can rack up major travel, lodging, lawyer, and visa fees. Even more helpful would be to employ a tax lawyer or an accountant. The most important thing to do is stay informed. The FAST Act can be read in full here.

Nexus

4 Key Questions About Nexus

An article in Forbes asked, “Why is multi-state tax compliance so hard?

One answer to that question can be found in a single word: nexus. The most thought-provoking sessions at the Tax Executives Institute Region VIII conference last month covered the gray areas of state nexus. Below are 4 key points that the panelists highlighted:

  • Do you want nexus or don’t you? One session began with this simple question. In general, tax executives try to manage away from nexus. You try to limit the employees and properties that you have in other states. But, one speaker argued, sometimes nexus can be good. If you’re already planning to enter a state within the next few years, you may want to claim nexus now. Why? Because claiming nexus can give you the right to NOLs (net operating losses) in that state. Of course, this takes planning ahead and knowing what your operations are going to do a couple years in advance.
  • The right to apportion. What if most of your operations are in one state and you happen to not have nexus in any other states? If you had the right to apportion, perhaps you can more proactively manage your taxes across states.
  • Filing methodologies. Consider the different filing methodologies you can elect. Around half the states allow some form of elected consolidation or accommodation. As you evaluate filing methodologies, it’s important to keep in mind elected consolidation, accommodation, apportion and nexus.
  • How does the state define business income? In some instances, courts have found that the definition of what qualifies as income doesn’t include a functional tax, and then a state has to amend its statute. There are multiple factors to consider here, not just marketing sourcing.

All of the speakers agreed that its critical to understand where you have nexus and where you don’t. If you’re claiming nexus, make sure that you have the economic substance in a state to legitimately create nexus. In some instances, states have gone after companies for falsely claiming nexus.

For more information on how business travel can create nexus and managing those risks, download our free whitepaper “On the Road and at Risk”

Business Traveler

Experts Highlight Challenges of Business Traveler Tax Compliance

Business travel is a growing concern for companies, according to experts from Bloomberg BNA, Ernst & Young, and the Minnesota Department of Revenue. A 90-minute webcast covered pressing issues including nonresident income taxes, payroll compliance and audit defense. Below are highlights from the discussion.

Nonresident Tax Enforcement Rising Steadily

It’s estimated that U.S. business travelers will take 492.1 million trips in 2015, up 1.7% from the previous year. At the same time, state audit rates are rising steadily and business travelers are in the crosshairs.

Which states have the most to gain from pursuing nonresident income taxes? EY’s Kristie Lowery stated there are three major factors:

  1. If a state has a high volume of nonresident visitors
  2. If the business traveler doesn’t pay income tax in her resident location
  3. If the nonresident income tax rate is greater than the resident tax rate (this is most likely in states with very high personal income tax rates)

“The question is no longer if employers should comply with nonresident income tax, but how,” said Lowery.

Understanding Nexus for Resident Income Tax Withholding

What triggers nexus?

Nexus is typically triggered when a company conducts business or has some type of business connection to a location.

Are there general guidelines to what constitutes nexus for income tax withholding purposes?

In general, employee work presence in a state is taken into consideration. However, state and local laws vary in how they define what constitutes nexus. In addition, other factors can affect nexus for other business taxes, such as franchise and corporate taxes.

What is the Business Activity Tax Simplification Act (H.R. 2584)?

The Business Activity Tax Simplification Act is a bill that would prohibit states from imposing corporate and/or gross receipts taxes to companies with physical presence in a state for fewer than 15 days. The act was recently cleared by the House Judiciary Committee for a full House vote.

What is courtesy income tax withholding?

Employers may withhold resident income tax for the employees’ convenience, even if there isn’t nexus. However, it’s important to be aware that special registration may be necessary to avoid incorrect assessments of other business taxes.

Payroll Tax Pitfalls

Important payroll tax variables include whether the employer, employee, and wages are covered.

Employers – Some types of employers and industries may be exempt from nonresident income tax requirements. Non-profit organizations and government employers are exempt from FUTA.

Employees and employment – Variables that affect whether withholding and employment tax apply include the type of employment, employee-specific exemptions, time worked in the location, and worker classification.

Wages – Every jurisdiction maintains its own definition of covered wages. Some common exclusions include health or welfare benefits and qualified retirement plan contributions. However, these exclusions don’t always apply, depending on the jurisdiction and tax type.

Putting a Process in Place

When putting in place a policy, change management and communication are crucial. Employees need to understand why a new process is being put in place and how it may affect them. Tim Dalton from Ernst & Young stated that companies can perform a one-minute tax risk assessment, ranking their risk from high to low on each of the five phases of mobile workforce income tax compliance: policy design, trip tracking, tax research, tax onboarding, and withholding and reporting.

“Communication and consensus among stakeholders and coordination with service providers are key to designing and maintaining an effective system for managing your mobile workforce,” said Dalton.