No one likes surprises, especially at tax time. Identify employees who are in unique tax situations and notify them of potential impacts.
For Transferees with Stimulus Check Impacts:
Transferees had additional taxable income due to relocation, which may have impacted their stimulus checks. However, some may qualify for a tax credit – on their 2020 filing – that is equal to the stimulus amount they would have received had they qualified on their 2019 (or 2018) filing. So before giving money to an employee who says they lost out due to relocation, it is recommended to wait until after they file their 2020 tax return in early 2021.
For Out-of-State Remote Workers:
Remember, each employee’s situation will be different and should be analyzed to determine how their income and state taxes should be reported. Once you identify which employees may be liable for additional state taxes, educate them accordingly. If an employee feels they were negatively affected, an audit of the state returns could help determine if this caused an increase in tax liability.
For All Employees:
If your company is reimbursing employees for pandemic-related expenses, please instruct them to submit all receipts to you in a timely manner. They should be aware that they cannot deduct work-from-home expenses. However, if they receive COVID-based reimbursements, they will not be considered taxable income.
Here are some further resources to help guide you through tax season: