04:05 AMERICAS
On the other side of the spectrum, many businesses fail to recognize some available tax advantages, paying employment taxes on items when they don’t have to. It is important to clarify that, in the U.S., there are federal tax requirements and there can be state and local tax requirements. While many sub-national jurisdictions with employment taxes generally follow federal tax law, often there are specific areas where they do not conform. Among the most common areas I’ve witnessed employers fail are in handling various types of fringe benefits.
The only exception is for moving those in the military to new posts. Before 2018, under some interesting documentation requirements, employers could exclude from tax certain costs associated with moving an employee (and family) for business purposes. Employer reimbursements and paying movers directly could be tax-free to the employee under these criteria. After 2018, most states with income tax requirements followed suit, adjusting their state tax codes to conform to the federal law change, taxing these reimbursements and employer- paid costs. But, more than a handful of states have not adjusted to conform and still allow certain moving expenses to be excluded from income. This is often missed by payroll for the proper set-up of the earnings code in the payroll system. The earning code set up generally should be: taxable for federal income tax, Social Security, Medicare, and federal unemployment, but excluded from income for each state’s tax that allows the exclusion.
While many sub-national jurisdictions with employment taxes generally follow federal tax law, often there are specific areas where they do not conform.
Moving Expenses Starting in 2018, at the federal level, all moving expenses paid by the employer is taxable income.
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GLOBAL PAYROLL MAGAZINE ISSUE 12
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