GTN Mobility Tax Blog

You likely know by now that employees who receive equity-based compensation, and who relocate—domestically or internationally—during the life of the award, create tax withholding and reporting obligations.

Still, when it comes to equity reporting and withholding, companies do not always address the risk with their mobile workforce. Often this comes down to a lack of manpower, information, or technology. 

So, how do you move from the stage of recognizing the problem to finding and implementing a solution?

When it comes to payroll reporting and withholding for equity compensation, companies don't always realize they may be non-compliant if they have a mobile workforce. These companies may be unaware of the rules in the various jurisdictions their employees have worked, and they may not have processes in place to allow for the tracking of employees. For these reasons, the payroll reporting and withholding, related to equity income, may be handled as if the individual had only worked in one location. However, this approach is often not appropriate for mobile employees working in multiple locations since reporting and withholding rules can vary for each jurisdiction.

US social security tax is withheld from employees’ wages under the Federal Insurance Contributions Act (FICA), which provides funding for the Social Security and Medicare programs. The goal of the Social Security program is to offer retirement, disability, and survivor’s benefits, whereas Medicare provides health insurance. 

Although many companies believe they have a good process in place to address the withholding of these taxes for their US-based employees that work in the US, it is critical that they review and understand the rules for their internationally mobile population. Through proper review and planning, companies can mitigate risks and may also achieve substantial cost savings.