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.