Year-end reporting is a critical process to Global Mobility. Companies are obligated to report to worldwide tax authorities all pay, benefits and relocation-related expenses provided to each assignee during 2020 and ensure all is accounted for on official year-end wage statements. Completeness and accuracy is essential.
The COVID-19 pandemic added new layers of challenge and urgency. Early repatriations, alternate destinations, travel bans and quarantines, “virtual” assignments, remote and work-from-home arrangements, unique tax-exemptions and more introduced unprecedented complexity, risks and opportunities. Are you ready?
Bristol is here to help. Expert knowledge and successful execution of Global Financial Services are critical to all mobility programs and part of our DNA at Bristol. Our holistic team approach begins with leveraging internal subject matter experts from each financial discipline. As 2020 draws to a close, cross-departmental service delivery is more critical than ever. Bristol is facilitating our clients' year-end processes by ensuring all data points, logistical and financial, are accounted for accurately and timely. Here we’d like to offer some brief practical insights to help you improve your own year-end efforts.
Orchestrating the Process. If financial services were a musical passage, year-end is in fact the crescendo! All stakeholders in the mobility process impact data points throughout the year. Client Mobility Teams and RMCs must capture key dates and facts such as who is on assignment, on what day did they arrive, account for all dependents and their citizenship. Business updates are shared such as merit increases and bonuses, are they localising the Employee, is a short term assignment changing to long term, etc. Data Providers may share table updates and exchange rate changes impacting assignment allowances. Tax Partners will provide critical tax reporting on all assignment types which may include requests for tax authority or tax equalisation payments. These ongoing activities that occur during the year gain momentum and importance as we head into the 4th quarter of the tax year. Year-end activities tie together the entire year of ongoing activities and in turn provide the opportunity to ensure all data points and financial attributes are accounted for correctly.
WHY IS THIS IMPORTANT? In a word: Compliance. Companies are obligated to report all pay and benefits provided to each relocating employee during the tax year. This includes salary, bonus, benefits, pre-tax deductions, actual and hypothetical tax withholding in addition to payments such rent and utilities, car or transportation allowances, relocation expenses, cost of living allowances (COLA), tax gross-up payments, lump sum allowances… in a word - everything, including cash and in-kind benefits.
Through our holistic approach, Bristol prepares a final, comprehensive year-end reporting statement for each relocating employee whether it's for a long-term assignment, permanent international move or in-country domestic move for filing to worldwide tax authorities. Much like our daily lives in 2020, the rules governing reporting for 2020 are anything but ‘normal’. Here are some foundational activities we follow here at Bristol that will support your success for tax year 2020.
Each Client’s process has steps that are unique to them but the framework for pulling together all these steps can be applied for most:
First: Know your process stakeholders. The importance of identifying who has a role in the overall financial and year-end processes cannot be overstated. Whether they provide the list of those receiving services, the current salary to correctly process tax assistance, or help with the crucial IT security for sharing files - Know your stakeholders and get them engaged. Planning and setting expectations upfront will save time, effort and money while ensuring a thorough and compliant delivery.
Construct a plan: Active and open communication is vital between Bristol and corporate Mobility, Payroll, Tax and host country business unit stakeholders to ensure a clear understanding of respective roles and accountabilities. Document the schedules and availability of each stakeholder as part of the overall plan.
Review Tax Law Changes: Engaging Tax Partners should be a regular step in any global mobility process. As we have said, 2020 is a year unlike any other and while it is always important to review your Corporate position on tax assistance it is even more critical this year with Covid-19 related tax changes impacting reporting in many countries.
Develop a year-end calendar: Bristol strongly recommends establishing a detailed schedule clearly defining all critical deadlines including payroll cutoff and tax reporting dates. It is also important to understand the full scope of your global reporting. For example, the U.S. and Canada are on the same calendar tax year (Jan-Dec); however, if you also operate in the United Kingdom your year-end ‘calendar’ will now be ‘calendars’ as the U.K. tax year is April (2020) to March (2021).
The Audit Process: We recommend that data from alternate sources such as host location HR, Tax and payroll departments etc. be reported monthly or quarterly at a minimum. Regularity and repetition of manageable amounts of data achieves an effective communications flow that increases accuracy, lowers stress and provides a clear escalation path when questions arise along the way. As the data is received by Bristol we audit for reasonability based on our knowledge of the Client’s policy and the specific allowances unique to each assignee as set forth in the Assignment Letter and Cost Estimate. Bristol’s Elite technology platform is a single source for this information which enables secure data entry and audit.
“If you have not been completing audits throughout 2020 do not panic, it’s not too late” says Katie Lenehan, Bristol’s VP of Compensation and Information Systems. “As part of your year-end plan insert a task to review all data year-to-date now. By completing a review through the end of September you can identify any major gaps in information that can be corrected as you head into the later part of Q4”.
The home stretch: With the proper steps taken all year to track and collect data, year-end then becomes a very manageable process of verification, reconciliation, reaching out to stakeholders and escalation if necessary for confirmation and to fill any gaps in advance of the reporting deadlines.
Review and Plan for 2021: How is YOUR year-end going? Please do not hesitate to reach out to Bristol if you have any questions or need assistance as the 2020 deadlines approach. If in reviewing your own processes you feel they could be improved, let’s begin laying the foundation for 2021 now.
Remember: Start Early. Communicate. Collaborate! If you have any questions on how Bristol can assist with your compensation needs, please contact your Client Engagement director or reach us at firstname.lastname@example.org.
Here's to a safe and successful 2020 year-end, and to a better 2021!