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Work from anywhere in the world

I want to welcome you and thank you for joining U.S Bank's webinar on navigating today's work-from-anywhere world. This topic was a popular request on our recent corporate survey. And we're thrilled to have two experts offering a human resource perspective as well as a tax perspective on this very relevant topic.

We're going to start the session with some polling questions for our audience. So if you can look to the right panel of your screen and answer the following questions. We have the first question-- what percentage of your employee base is asking to return to the office full-time? And also, what percent of your workforce will remain permanently work-from-home after COVID?

And Colleen will put the results up as soon as we have them. And I can go over them with you.

Yep. We see a few more people are submitting their responses. So just another few seconds.


OK. The results of the poll-- the first question on what percentage of your employees are asking to report back full-time to the office-- we have 36-- we have a tie, actually, between less than 10% and between 10% and 25%. So it looks like the majority of employees are not asking to come back to the office, which is interesting.

What percentage of your workforce will remain work-from-home after COVID-- and it looks like 40% answered between 10% and 25%; the next highest was between 25% and 50%. So again, that matches the first polling answer.

Moving on, I'd like to introduce our first speaker, Michelle Labbe. She is Chief People Officer at Toptal. She leads the People Recruiting and Learning and Development teams for Toptal's fully remote global workforce and offers consulting services on this topic. Her mission is to create and maintain a world-class experience for all Toptal team members through hiring, developing, and retaining their top talent.

After starting her career at larger firms, Deloitte and Accenture, she joined smaller agencies and startups-- Patch, which is a division of AOL, Rent the Runway, and ICR. After 25 years of sitting in a physical office, Michelle decided it was time to explore the trend of location-independent work and joined Toptal two years ago. Michelle has a bachelor's degree in political science from the University of Arizona. Michelle, I'd like to turn it over to you.

Thanks, Kathy. I've never heard myself introduced like that-- reading out front. So it's kind of hard to hear all-- how old I am and all the things that I've done.

So hello to everybody. I'm going to-- here's the agenda that I'm going to go over today. I will tell you, in addition, my background, as Kathy just said, is I've been traditionally in offices-- in corporate offices; had people in the field; big companies, small company; New York, San Francisco, middle of America. I've kind of been there and done it all, as well as international.

And two years ago, I got a phone call saying, hey, we want to talk to you about Toptal. And I'd never heard of Toptal. Who we are is-- Toptal stands for "top talent." And what we do is-- they have a-- we have a fully distributed workforce.

So the company started 10 years ago next month. And it started as a fully remote company. So I live in a fully remote world before COVID, during COVID; I'll live in it after COVID. I think it's just interesting how we seem to be on the forefront of this mission of the days that we're living in today.

So I have about 700 employees. We also have about 5,000 to 10,000 people in our-- maybe 7,000 people in our talent network. So what we do is we work with big companies, small companies.

We could work with U.S. Bank, for instance. And they could say, we have this huge project that's going to take six to seven months. We want to hire you. We need engineers, or we need designers. And we already have that talent sitting globally in our network that are-- we say we're the top 3%.

So we only get-- we only take the top of the top people. Not somebody-- somebody can't sign up and say, oh, I can be a consultant. It's a rigorous process to go through to get into our talent network, which then is going to lead to how we hire for our folks too.

So again, we were all over the globe. And I never knew what an HR remote job was going to be. And I was intrigued and thought, ooh, I could live anywhere. I could go hang out with my mom in Florida, or stalk my son at college, or whatever it is. And it didn't matter where I was.

So I will start here. So the way I look at it-- I think people know-- is-- you have this employee lifecycle, I like to call it. So it's from recruiting, to on-boarding, to learning and development-- how we treat people; how we train them, give them career guidance, give them feedback, coach them to really sustain a strong team.

And these are the same things that happen in every company, hopefully. And therefore, it happens in every company, but how do you do it from a remote perspective? So I'm going to kind of tell you what I've learned in the last two years being remote, what the company was doing before me, and kind of share my wisdom and hope it resonates with some of you in this new normal that we're all facing.

So the first step of that employee lifecycle is recruiting. And I would say the things that differentiate us for how we recruit is, really, on our careers page we do-- it's very clear what our culture looks like, what our job descriptions are. We spend a lot of time doing detailed job descriptions. We talk about what the role looks like; and what you're going to do in your first month, first six months, first year; and what we expect of everybody.

Complete transparency on the page-- who you're going to be working with, what our mission is. We do have a very unique culture that we've developed, which I'll get into later. But we want to make sure that everyone actually reads the culture page right up front so they feel like, OK, this is the company I want to work for.

I think the big thing that we do that set-- that differentiates us, especially in this remote world, is we have no office. We've never had an office. There's no headquarters. There's no building, which saves on a tremendous amount of costs and overhead. But it also-- it enables us to post jobs globally.

So if I have an opening for a salesperson, or a finance person, or an engineer, I can post them in California-- although I would probably choose not to. Or Southern California-- instead of San Francisco, I could post it in Sacramento, because we're always looking for the best talent. And it doesn't matter where they sit.

We can go to lower-cost markets. They can go to the Midwest. I stay away from New York, and San Francisco, and Seattle usually-- high-cost markets. We can go to South America, anywhere.

And I think one of the big selling points about Toptal is we have this culture of-- people start. And they're like, I don't-- I'm temporarily in this state. I would like to move to a different state. I'd like to spend six months somewhere else. And we have that flexibility.

We do require that everybody speaks English, can write in English, communicate-- speaks, writes, communicate-- everything in English. And some roles are timezone-specific. But we don't have this-- we don't have to be in person anywhere.

And I think that that's something that if you all-- especially with these poll results of folks not wanting to go back to the office, it's something to think about of if you ever really need them to go to an office if they're never going to go back or don't feel comfortable going back. And it really opens the talent pool to hire from anywhere in the world.

We-- not only do we do the job descriptions, we do assessments, right? Because everything that we do at Toptal -- we live on Zoom and Slack. So everything is in person. This is why I have this exciting background that I have now, where I wish I was on vacation because it's my window to the world, I guess.

But what it does to me is it's more personable. You're looking somebody in the eye. You're not multitasking. You're not calling into a conference call. Everything we do is on Zoom, especially when we're interviewing. So I'm looking at the person. I'm giving them my full attention. I'm not e-mailing on the side or doing anything else.

And so we have these assessments. We have interviews. Everybody has a different assignment on what they're going to ask the candidates. And the assessments are really-- they're skill-based projects that take two to three hours that basically say, if you're going to join our marketing team, how would you focus this brand initiative? So it's tailored to every role. Because, again, you're not meeting somebody in person.

So we have four interview paths, and then we do a culture interview. And in the last interview is we really say to these folks, have you read our culture page? Are you-- is this something that you want to do? Does this sound like something you can resonate with? Because, again, culture is really important here. And being 100% remote is not for everybody. We have had some pitfalls with that, which I will discuss later.

On-boarding-- we've spent a lot of time perfecting our on-boarding plan. We have a new hire start date every two weeks. We make sure that people have the sense of community. We have start groups. They introduce themselves. They chat.

We have-- I don't know how familiar everybody is with Slack, but it's almost like an instant messaging tool, which is what we do. We actually don't use email internally. We use Slack. So it's more like chatting with someone, getting a quick answer-- saying, can you jump on a Zoom call? And not everybody's familiar with all this technology.

So we want to make sure people have the extra help, if they need, to understand-- understand Zoom etiquette, understand Slack etiquette, teaching remote best practices. Whereas we want to make sure people have a life balance, maybe making sure they have the right lighting, or you're not sitting in a dark place, or-- I have somebody that was sitting next to their laundry room and had the laundry going while they were on Zoom calls all day long. It's like, we don't want to hear your dryer. So it's really more about etiquette.

We also talk to them about the company history. Everything's done on a learning management system. So we do have-- that first meeting is in person. They do learning paths all on our-- about learning about the company, about the different departments. They watch videos of executive profiles. Really, just the anti harassment-- all those type things all come on online. And we try to make them fun and interactive. So it's not just this boring-- watching things all day long.

We have an internet that's pretty robust that shows org charts, and people's pictures, and fun facts about them-- where they're located. We publish OKRs at the company-- objectives and key results. Those are all there. Our career development plans are all on our internet. So we want to make sure people have the tools and technology to be successful. And it really starts with on-boarding.

We give everybody a buddy so that folks know-- hey, I want to ask you some questions, but I don't want my manager to think less of me-- so they can ask their buddy those questions. And then we also want to find the fun.

So as I mentioned, we have Slack. And in our Slack channels, we have a book-lovers group. So even though remote, we have discussions. We have a book club meeting every month. I think that's a very popular channel. We have a pet-lovers channel, which everyone is posting, from their dogs, and cats, to pigs, and birds, and whatever pets they have.

So we really try to foster this sense of community even though we're not in an office. And most people never meet in person. Teams do have off-sites once a year-- not now with COVID. So we try to make sure everybody's engaged.

Again, learning and development-- it's really ongoing paths. So we build manager training in-house. I think we have-- we partner with Udemy, which has a lot of classes. In my previous life, it was LinkedIn Learning that we partnered with, which is also a great tool.

There's not a lot about managing remotely out there. So we've actually built a lot of stuff in-house for managers about how to do that. We record everything. We record Q&As. We do lunch-and-learns.

Again, to me, it's all about this-- what can we do to engage people? Some people like to learn watching videos and classes; some people like the interaction. And we offer both. So-- again, all on Zoom and all online.

Same with performance management and career development. We do annual reviews and mid-year check-ins. A lot of companies do that as well. Again, these are things that everybody does, but how do you do it remote?

And so for us, it's really these-- having these deliberate conversations. You have to over-communicate when you're remote because you're not going to walk by somebody in the hall and kind of say, are you doing OK today; you don't look happy. You have to really go that extra mile. You have to also make sure that people are setting their goals and hitting their-- hitting the goals that they've set for the year.

We do quarterly check-ins at the executive level to make sure the company is still on track. And we ask that every team do that too. Because again, you're missing the hallway conversations, which is somewhat-- from what-- what I've learned is people find them-- that they're much more effective and get a lot more done when they're at home without people dropping by and chatting with them all day long.

And so really, we want to make sure everybody knows what their goals are. We have career maps for every role so you know you start here. And when you hit this next skill set, you'll get to the next level. We publish all of those on our internet in case people want to switch departments or try something new. We offer everybody-- we have a mentoring program that anybody can take us up on at any time.

And then the other thing I think which is-- it differentiates us a little bit, but it's more about our culture, is when we do annual reviews, we do them in our own system that we built. But you will see everybody's feedback. So instead of it bubbling up to a manager and the manager gives the feedback on behalf of everybody, our employees see what everybody said about them.

So not everybody sees everyone else's. But at the end of the year, I'll see what my peers said about me-- my team, my co-workers, and the people that report to me. So. Again, all things that companies have, but this remote thing is what's caused-- this is kind of where I come in here to share what I've learned.

Creating a values-based culture-- so really, as you all know-- and culture is really the foundation. And I call it-- it's our DNA. It's who we are. It's how we make connections. It's how we all identify with our company. And again, when you are remote and you're not having coffee in the office or-- our all-hands meetings are all on Zoom.

You want to make sure that everyone still feels the culture of the company. And we do post our values. We do-- we have cultural interviews, like I mentioned, with cultural ambassadors. We recognize cultural achievements in our annual performance reviews. We do shout outs on our monthly all-hands call because, really, it's all about our values. And we really want to make sure that everybody working here can recite them or-- and it's putting them in motion.

We're not a company that says, oh, here's our values, but then once someone's been here six months-two years, they can't name them anymore; they really forgot what they are. We really all have to be on board. And I think the number one thing that happens with a fully-remote company is the collaboration.

And folks are working together. But everybody's in the same boat. So it's not like, oh, I'm missing out, because I work remote and other people are in the office. We're all remote. So we're all in the same place. And really having this cultural norm and all these values that everyone can speak to, and work around, and work with-- it's kind of-- it's made us very successful.

The way that we make sure-- and engagement is huge. I do one-on-ones. I randomly check in with people all the time. We do these poll surveys over Slack every other month. And it's just two questions. It's, how happy are you-- it's like an employee NPS-- why would you recommend somebody to work here? And we look at those scores.

Again, none of our surveys are anonymous. Everything-- we're a very transparent company. And so if I see somebody that's kind of been consistently low, I will call them and be like, hey, what's going on? And it's maybe, it's my compensation I'm not happy with, or, I'm not-- I'm having issues with my manager. But it really is a way to gut check what's going on with folks.

People often ask, how do you know if someone's not doing well? Well, if you set their goals and they have-- they're on projects that are collaborative and with their team, you'll know if you're not holding up your end of the bargain with your team.

I also make sure on Zoom calls that people are on video-- not for 50 people, but if there is 20 or less, everyone needs to be on video, and we require people to. Some people might say, I'm having a bad day; I don't feel good; I don't want to be on video-- which is fine. But 95% of the time, they should be on video.

And that's kind of the way we get to see-- are you smiling? Are you engaged? Are you part of the Slack conversation that we're having? Are you contributing. So I'm always looking at ways to make sure people are engaged and happy.

Again, we do all-hands meetings every month that are an hour and half, that are packed full of a lot of information, from financials to new projects, so that no one feels like the things that they're missing in the hallway conversations-- we make sure that we want to overly communicate and convey what's going on. Everybody has team meetings, regular one-on-ones-- really, really important. Even managers that tend to cancel for more important things-- we coach them why that's not a good idea.

I have a culture committee that's a representative from every team that-- we try to do fun things. We meet every other week. So for instance, in September-- there were 30 days in the month of September. We did a 30-by-30 challenge.

So we had these five teams of people that were matched-- teams of five that had to work out every day for 30 minutes for 30 days. And we had a bunch of different incentives if you did-- I don't know-- extra biking, or rock climbing, or cleaning the house, or whatever it was. So we've done a lot of fun things around that.

We're doing trivia. We're doing something called Top Secret for the holidays, or like a gift exchange. We do a lot of things. We have this thing-- we're making part of our internet the water cooler-- so the conversations that you would miss in the hallway. And we do that through our Slack channels, which-- I was, again, talking about the pet-lovers.

We have a coffee channel. There's TV show things. I know when Game of Thrones was on, it was the biggest channel that we had-- people were debating back and forth. I think there's a Bachelor or Bachelorette channel-- I'm not in that one.

And then rewards and recognition-- these are also important, because you don't feel like you have that pat in the back, that no one's watching how many hours a day you're working. And you feel like you're missing out. So we have things-- instant recognition, shout outs on all-hands-- again, very public.

The one thing I'll not say enough of is you ha-- it's not always easy to work remote. And so people kind of have to speak up for themselves. They have to-- you can't have somebody that needs micromanagement or hands being held, because you have to have that self-motivation to get up every day and work. And I have found-- we definitely hire to that.

Productivity-- again, we want to make sure our people are effective working remotely; that they're aligned. We have a huge push around accountability along with transparency because we want to make sure everyone is held accountable. Nobody-- it's interesting. And it was an adjustment.

I come from a company where folks really wanted to-- FaceTime was huge. Oh, this person came in at 9:10; they usually should have been here at 8:30; how long did they take for lunch-- people watching each other. And I think it just fosters not so great of an environment for everybody.

And so working remote, you have to trust your folks. And you have to trust them until they do something that makes you not trust them anymore. But for us, we almost have the opposite problem. You can go-- you can hide somewhat when you're not walking into an office.

But on Slack, we make sure that people put if they're walking their dog. We don't care if someone's going to a doctor's appointment. You don't have to say, can I go to a doctor's appointment? You just kind of put a message-- I'll be back in an hour.

We really want to make sure folks have a-- the healthy work-balance, because people will tend to work longer hours, definitely, working remote because they don't have a commute, which is really positive. But it's sometimes-- there are days I forget to block my calendar for lunch. And I realize, I haven't eaten, and it's 4 o'clock in the afternoon. So we really want to push that for folks.

We don't want to over-meeting it. Sometimes, calen-- companies tend to have way too many meetings. And especially remote, they feel like, oh, I have to meet with these folks to make sure that they're doing what they're supposed to be doing. We really make sure that our meetings that we have are deliberate, and there's a purpose for all of them, and someone-- and everybody gets something out of it. Or otherwise, we don't need to have that meeting.

I think I've talked about accountability and alignment. We t-- we help people about creating, again, the remote work setup-- make sure you have a comfy chair, or you have an ergonomic keyboard, or whatever those things are. And we really-- of all these things, the tools and technology make us very successful.

So everything that we do, we have to have the right technology. We have to have the right tools. We have to have the right mindset to be productive.

Challenges-- so some of this stuff came from questions that you all submitted before, as I was doing my deck. You asked about relocation. So for us, anybody can work anywhere. And I know there are some things that limit this with taxes-- which David will speak to in the next presentation.

But we have this thing-- we call them-- and I didn't know this term, but it's a term called "digital nomads," which I've learned more about. I have somebody-- a recruiter that works for me-- that has probably lived in six or seven countries since I started-- or states. She'll spend a month in Portugal, two months in Mexico.

We have people that follow the sun. We have people that follow the ski whether. They work. They travel the world. They can work for e-- from wherever they want. We don't ask. If they are required to be in a certain time zone, we ask that-- at some point in the day, all of our employees have to overlap with the east coast time zone.

So our all-company meetings for important things are usually around 11:00 AM, East coast time, so that folks know that they have to kind of cover that. Again, we have sales folks and customer service folks that are all over the world and have to cover different time zones. But we don't care where anybody is.

The one thing is it depends where they're a citizen of. And we do not change compensation based on where somebody moves to. If I had hired somebody in San Francisco and they decided to move to North Dakota during COVID, I'm not cutting their pay. If the opposite happens, it becomes a problem after a while, because you have to see if somebody is relocating permanently. If it's a temporary relocation, we don't do anything-- and most of the time we don't.

Folks don't tend to go to higher cost of living. They want to stay in the lower cost of living places. But we're very clear that we need to make sure folks are covering the time zone that they're supposed to be covering.

And we have had a lot of COVID cases, I will mention that. We are-- because we are international. I have about 30-- 25-30% of our employees are in the US. The rest are outside of the US. And so we've had that. We do try to go to off-sites to meet people in person.

We just-- I think the name of the game is flexibility and trust. I remember my CEO-- when we first started, he was like, this is going to be easy. All of us are-- we're already doing this. We've been 100% remote. And I said, yes, but people now have children that are at home, or their kids can't go to day care, or they have parents with them-- whatever it may be.

So for us, it really just became about this compassion-- being more compassionate, understanding, empathetic, and flexible, because not everybody-- some people have no adjustment; some people have a huge life adjustment. And especially-- it's ongoing. And we-- none of us really know when it's going to end. So-- or come back again.

So I think-- oh. This is the last-- my last slide. I just wanted to mention-- I'm trying to keep within my 20-minute time frame here. On Toptal, we do have something called the Remote Work Playbook. It's free. It's downloadable for anybody.

Our executives and myself took a lot of time talking in detail about how we do this. I kind of framed this presentation around the different areas in the playbook. But it really just helps kind of give a more play-by-play, detailed instruction of how we've developed remote over the past 10 years and what we've found to be successful. So I hope that was helpful.

Thank you so much, Michelle. That was great. We found it really interesting and very helpful. We do have three additional polling questions we would like to put up on the screen. And if you look to the right of your screen, you should be able to see the questions to answer them. I'll give you a couple minutes to respond on that.

The first one is, does your company have any type of policy for remote work? And the second, is your company adjusting compensation depending on location-- stipends or reimbursement on expenses from a local and/or cross-border perspective? And the last question is, is your company allowing employee requests to blend work and vacation abroad?

And Kathy, I see we have quite a few people still responding. We'll give it a few more seconds.


So the results are in. And the first question on policy-- it looks like 48%-- 48.5% say, yes, they have established a-- they have an established policy pre-COVID. 18.2% said they're developing the policy now. So that's great.

Next question-- it looks like 57% say, no, they are not adjusting compensation depending on location. And is your company allowing to blend work-- it looks like the majority say no-- 39.4%. And the next-- 27.3%-- is case by case. So. Very interesting.

And so next, I'd like to introduce to you David Oltman. You will have received through the email-- I think we mentioned that earlier. If you didn't, just let Colleen know by raising your hand. And I'll introduce David.

He's one of the relocation industry's foremost tax resources. He has brought his expertise and the strength of Relocation Taxes, LLC to the INEO family of services. David now leads Ineo tax division, relo tax, and serves as the company's chief compliance officer. David is the WERC Meritorious award winner. He holds a BA in human resources and an MBA in finance. Now I will turn it over to you, David.

Great. Thank you very much. Yeah. Again, it's my pleasure to be here. Just a few kind of shout outs to a few people I believe are on the call today-- Jill Rooney at Kohls. Just wanted to say hi to Jill. Cara Izaki, I believe, is on the call today. Hi, Cara. Johnny Hayes. Andrew Lloyd is here. And I even think Rick Miller is here from the GSA. So again, hi to all you great people. And without further ado, I'm just going to jump right into it.

The first slide I really want to focus on is slides of I'll call them dueling W-2s. Without the move, this is an example of a person's W-2-- kind of an average corporate transferee or an average government employee transferee who makes about $140,000 a year. And you can see their W-2 in the upper-left corner. On the bottom of the page is a W-2 with relocation.

As most everybody on this call knows, when the company pays to move you-- the transferee, the signee -- just about every single expense will hit the W-2; the exception is the third-party home sale costs. One of the greatest reasons to use a third-party home sale company is, generally speaking, all costs associated with selling that employee's old home-- broker's commission, legal fees, title searches, et cetera, et cetera, et cetera-- all those dollars-- the 5-6% commission; huge dollars-- those are not considered taxable income and do not make it to the W-2.

So again, great reason to use a third-party home sale company. Some people refer to them as an RMC, or relocation management company. But aside from that, just about every other expense a company reimburses for ends up on the W-2, from household goods, final trip expenses, temporary living, closing costs on the new home, miscellaneous expense allowance, et cetera, et cetera-- in this example here, it's roughly $68,000.

The point I wanted to make is, had this person not moved, their W-2 would have said about $140,000, which-- they know what they make-- roughly $140,000. And when they get their W-2 at the end of the year, they think, yeah, it's about right; it's in that ballpark. However, because the company moved them and added another $68,000 to their W-2, that over $60,000 is now on their W-2. Now when they look at it, it's over $200,000.

And because most reimbursed expenses never really are brought to the attention of the transferee -- a $20,000 van line bill that's direct billed to the company-- the employee may never see that bill. Other closing costs on the new home-- they never see those invoices. So when the employee gets that W-2, it's like, wow, is this really right-- $200,000? That's one point I want to make.

The second point I want to make on the W-2 is, because all this extra income is added to their W-2, the employee is now typically moved into a higher tax bracket. Maybe they're not eligible for certain tax credits. And as the next slide will show, a lot of people got stimulus payments this year, but because of the move they actually were not able to take advantage of those stimulus payments.

For example-- and again, this graphic on the screen now-- it's really just a theoretical check. The vast majority of people got an ACH, or either a wire transfer, an ACH right into their bank account. So this shows a check. And surely, some people did get a check. But again, generally speaking, most people got money put directly in their checking account.

If you're single and make under $75,000 a year, you truly expected you were going to get one of these stimulus payments back a few months ago; and if you made under $75,000, you surely did. On the other hand, if the company moved that single payment-- either last year, or maybe they're in the middle of the move this year and dollars are hitting their W-2-- they most likely didn't get a check.

Everybody on this call who's responsible for relocation mobility-- you've got to decide, because you moved them, do you want them to lose a $1,200 tax-free stimulus check? Now, the magic numbers for the married people are about $150,000. And it goes between $150,000 and $198,000. Anything over $198,000, they're not getting the check anyway.

So if you transferred a married person who makes $120,000 and their spouse makes $100,000-- that's $220,000-- they were never eligible for this check to begin with; hence, they didn't lose anything. You can't lose something you never have.

On the other hand, a lot of people who relocate make $120,000, $130,000, $140,000-- way under the $150,000 number. But because you moved them and-- again, in my example earlier-- added $68,000 to their W-2, they lost a $2,400 check. And if they've got kids-- basically, kids-- you get $500 per child. If they had a couple of kids, it was $3,400 tax-free.

If you get a $5,000 bonus, you don't even walk away with $3,400 after taxes. Now, because of the stimulus payment, you got a $3,400 payment that you maybe didn't get because you had relocation dollars either added on last year's tax return, this year's tax return, et cetera, et cetera.

This is a very complicated issue. The good news is we've got a form-- and most people here, my email's available on this. There's no charge-- 100% free. You can email me. And I'll be happy to email you a form that your employee can fill out.

And it can determine if they truly lost that $1,200 or $2,400 payment because of the move or they didn't lose it whatsoever. So that's available to anybody that wants. After this call, just shoot me an email. I'm happy to provide that information.

OK. Now we get into the more complicated areas. Now, time does not permit me to go over every single item on this slide, but I want to kind of hit the highlights. The highlights are-- I stated earlier just about every expense is taxable. And that's true.

However, in these seven states-- Arkansas, California, Hawaii, Massachusetts, New York, New Jersey, and Pennsylvania-- those states still allow you to deduct your van line bill. And I'll just pick on California because it's got a very high tax rate-- most people are in the 9.3% to 13.3% bracket. I'll just use 10% as a ballpark.

If you had a $40,000 or $50,000 van line bill and relocated to California, every penny of that $40,000 or $50,000 is deductible. Well, because the tax rate is 10% in California for so many people, that is literally saving the employee over $4,000 or $5,000.

The point I'm making is, if you're responsible for doing gross-ups or providing tax assistance, you want to make sure who's ever doing them on your company's behalf-- they're not grossing up for van line costs or final move costs in Arkansas, California, Hawaii, Massachusetts, New York, New Jersey, and Pennsylvania.

How do I know this? I'm very, very fortunate. I've been in the industry for many, many, many years. And many of you know, my license plate is "gross-up--" G-R-O-S-S-U-P. I'm the guy driving down the highway that's got "gross-up" on their license plate.

With that said, so many people send me their tax returns at the end of the year and say, hey, can you take a look at it; how did I do? We're also fortunate over 2,000 companies use our software. Over 200,000 moves were also processed by our company last year. So the point is, I get to look at a lot of different companies' software, a lot of different companies' tax returns, and all that good stuff.

The point I want to make is, in looking at those thousands and thousands of corporate transferee tax returns, I can't tell you how many people did not deduct their household goods or final move expenses in these seven states, costing those taxpayers tens of thousands of extra dollars. So once again, just because an employee complains, hey, they didn't like their gross-up-- your gross-up may have been done perfectly. Your relocation management company may have done a great job doing it. But unfortunately, the taxpayer may not have taken advantage of the tax laws in any one of these seven states. So just something to think about.

Next item-- mortgage limitations. Obviously, U.S. Bank-- we're talking about mortgages. For years and years and years, if your mortgage was over $1 million, you had limitations. Because most people who transferred didn't have mortgages over $1 million, this wasn't such a big issue. Now it's been reduced to $750,000. So any mortgage amounts greater than $750,000, you can't deduct any interest above $750,000.

So many people who relocate to high-cost areas can't take that full mortgage deduction, but most companies' policy say, we don't gross-up mortgage interest because it's deductible. Most mortgage policies say, we don't gross-up points because they're deductible; we don't gross-up mortgage assistance because it's deductible. Well, it's only deductible for the first $750,000.

So I'm encouraging companies to consider changing your relocation policies that says, we won't gross-up mortgage interests that's deductible, but mortgage interest that is not deductible-- hence, taxable-- we will gross-that up. Because I know the spirit of most companies is, hey, if they can deduct it, we don't want to gross it up; but if you can't deduct it, we do want to gross it up. So major, major issue-- that $750,000 mortgage limitation.

The last item I highlighted on this page is supplemental withholding. So many companies only gross-up at 22%. How do I know that? I know that because hundreds of thousands of companies are using our software to calculate their gross-ups. And we see 22% as the average rate.

However, most employees who relocate are in either the 24, or 32, or higher brackets. When you're in a higher tax bracket than your actual gross-up rate of the 22% supplemental rate, your gross-up is not going to cover all your tax liability. It's up to the company to communicate what is the spirit of your policy.

If the spirit of your policy is just to gross-up at the supplemental rate, so be it. But please, communicate to the employee, the spirit of our policy is the 22% supplemental rate. If you may find yourself in a higher bracket, you should budget accordingly and make an estimated tax payment to cover the additional taxes you're going to owe because you're removed.

On the other hand, if your company policy is, we gross-up at 22%, but if you feel you've had an undue tax burden because of this move and perhaps you were moved into a higher rate, you can come back. We'll have our relocation management review that. We'll ma-- might consider an exception and give a few more extra dollars.

The message I'm trying to deliver on item number six here is please communicate the spirit of your policy. Do you allow employees to come back and ask their gross-ups to be re-looked at? Or is your policy simply, hey, we relocated you; we know there's a tax burden; we're grossing you up at the 22% supplemental rate-- that's it? Totally, totally up to you as the company.

That's one of the things I love about this area of relocation tax, is, while some items are compliance-based-- you have to do things-- when it comes to gross-ups, you can pretty much do whatever you'd like. Really, you control your policy, whatever you want it to say.

What's some of the COVID-19 impacts? The key word to remember is, you're always taxed in the state where you live. And generally speaking, you're also taxed in the state that you work. However, as Michelle had said earlier, there are these people called nomads. Kind of they end up all over the world. And a lot of people talk about virtual presence versus actual presence.

The nice thing about the tax code is you're only taxed where you're actually present. Virtual presence, as of today, is not taxable. Just because you're on a webinar in a third-w-- in another country anywhere in the world or any other state, just because you're digitally present, you don't owe tax. But so many people who relocate, who go on temporary assignment, especially during COVID-- maybe they ended up going back home. And in their home state, their company doesn't have an office. In other words-- let's just pick on Texas.

So let's say the employee's working in Texas and that company has an office in Texas, which is great. But let's say that employee lives in Oregon. So that employee lives in Oregon. And the company does not have an office in Oregon.

But in the past, who cared? Because that employee actually lives and works in Texas. But during the pandemic, they had to go home. They went home to their relatives in Oregon. And now they've worked the last seven months in Oregon.

There's a term called nexus-- N-E-X-U-S, "nexus." That company does not have nexus in Oregon. That company does not have the ability to fill out all the various tax forms and deal with all the taxing authorities in the state of Oregon.

So the bottom line is that employee cannot have Oregon withholding or an Oregon W-2. However, because they actually lived and worked in Oregon for the last six or seven months during this pandemic, they absolutely, positively must file an Oregon tax return-- very, very complicated, but something that is required by law.

That's the compliance. And that's one of the major changes of COVID, is employees have to file tax returns where they literally work, even though their companies may not have nexus-- N-E-X-U-S, "nexus--" in those states where the employee's actually doing that work. Major, major, major area.

Temporary assignment issues-- some people call them DTAs, domestic temporary assignments. The main message I want to deliver here is, while the expenses associated with a temporary assignment are not taxable, which is really great-- so let's say we're going to send an employee who lives in Illinois-- they want to go on an eight-month assignment in the state of Florida.

Great, I've always wanted to go to Florida. I'm going to get an eight month assignment in Florida. The employee's like, where do I go? Sign me up. So they live in Illinois, but now they're working eight months in the state of Florida.

Well, because they're in the state of Florida, that person-- and they worked there for eight months. Their expenses associated with their eight-month assignment are not taxable, meaning any airfare, eight months of hotel bills, eight months of food, eight months of car rentals-- none of those expenses are subject to tax in the state of Florida. However, the income they earned in Florida is taxable.

Now, the good news is Florida doesn't have a tax. So this employee is really, really happy. However, let's say the assignment was in North Carolina. And now the employee's like, oh, boy, I live in Illinois, where the tax rate's a little under 5%. Now you make me have a temporary assignment in North Carolina, where the tax rate is a lot higher.

Oh, boy. Because you worked the last seven or eight months in the state of North Carolina, even though it was a temporary assignment and the expenses, again, of that airfare, the hotel bills, the car rentals, the food-- none of those expenses are taxable. The salary that employee earned while working in the state of North Carolina now becomes taxable. And the employee must do a tax return in that state.

And let's just say the employee makes $100 grand a year and they would have only paid $5,000 to Illinois. But because you assigned them for eight months in North Carolina, now they owe $7,000. The employee took a $2,000 haircut, meaning their take-home pay is $2 grand less. Companies need to communicate to that employee, hey, we're asking you to go on this temporary assignment, and we're acknowledging you may owe a couple extra thousands dollars in tax. The company needs to decide are they going to pay that extra tax or not.

It leads me to the next issue of-- one of the most common new benefits that we see companies offering are called pre-move or pre-assignment tax consultations or tax briefings. It explains to the employees what their obligations are with their old state and their new state-- their permanent state, their temporary assignment state. So many companies are offering pre-move tax consulting or pre-move tax briefings.

There's a term-- I just love it-- called, don't tell me what the best practice is; tell me what the next practice is. Well, because of COVID, the next practice is companies need to provide an hour or two of that pre-assignment tax consultation to keep their employees in compliance and also to help the company better understand what do they need to do to keep their transferees and assignees tax protected accordingly.

We are going to go here. This is a great slide. It's reciprocal agreements. Well, I mentioned earlier most times you're always taxed in the state where you live and usually in the state where you work.

Well, this grid here shows states that have what are called reciprocal agreements. And it means if you're in a state that has a reciprocal agreement with another state, you're only taxed in the state you live. You're not taxed in the state you work. But it's got to be one of these reciprocal agreement states. So a really great slide to look at, especially if you're transferring people around and putting people on temporary assignments.

Disaster relief payments-- I like to say the candy store is open. [CHUCKLES] If you can say that an expense is relocated-- or associated with COVID-19, that expense can be treated as a business expense and doesn't have to be grossed-up. Who's ever doing your tax coding/your relocation accounting, I say scrub those expenses with a toothbrush.

Look at every one of them very carefully. Because if we can associate that expense was caused because of COVID, treat it as a business expense. It doesn't go on the employee's W-2. It doesn't need to be grossed-up. Really, really good news.

Examples would be child care, higher education costs, bringing kids back from school-- there's so many on these slides-- house hunting, transportation, purchasing extra food, more temporary living. Let's say you had an employee in a state, and they couldn't come home for six months because it was a red state, or it was a state that was under lockdown or quarantine, or all those good things.

Well, if, because of COVID, that employee incurred a lot more expenses, you as a company-- when you reimburse them, they don't need to go on the W-2. They don't need to be grossed-up all because you can treat it under the COVID section. It's called Section 139 the tax code. It's the disaster relief part of the tax code. It's really, really good news.

And my last slide-- it was mentioned earlier in my pre-- in my introduction every single person on this call should have a copy of the Relocation Tax Advisor book; if you didn't, by all means just ask. We can send you one. This book has literally been handed out to hundreds of thousands of employees every year. And almost everything I've just talked about for the last 20-25 minutes-- it's all contained in this book. If you are interested in getting a copy of this book for your transferees/assignees, all the information is contained in the book that you already have.

And the neatest thing about this book is, if you give it to your transferees or assignees and they have any tax questions whatsoever, mobility or not, there is a number in there they can call. There's an email they can be addressed to. And they're going to get answers to all their tax questions accordingly.

So take advantage of the book that you all have. And by all means, if you're interested, there's instructions if you want to give it to your transferees. Because again, it's like an insurance policy-- you're giving your transferees an extra support.

With that said, I'll just tell everybody good luck with your taxes. And again, don't hesitate to email me with any tax questions you may have. I love to answer relocation mobility tax payroll gross-up questions. It's what I do. I just love that. I'll turn it back over to Kathy.


Thank you so much, David.

Yeah, this is Colleen. I was going to say we have one question here. And I think, David, you've touched on it briefly. But just wanting to make sure we understand, this person has the approach of not really asking where employees were working-- and I think Michelle this came from your presentation-- but asking the question, then, well, what about corporate tax concerns and permanent establishment issues?

And I think, David, you talked a little bit about presenting that pre-assignment tax consultation. What if the person is doing this on their own and not being transferred? Is it-- the onus on the employee? Is that the case?

Yeah, exactly. It's kind of-- it's really the industry next practice, is-- there are so many tax issues today that weren't there last year. Employees really need guidance to maintain compliance; as do companies. Again, my example-- so many companies don't have an office in Oregon but had an employee working in Oregon because that's where their parents happened to live or a friend happened to live where they could hang out for the last few months. Doing that pre-move tax consultation gives the guidance to the taxpayer how to file their tax return but also gives guidance to the corporate payroll department on what they might do to hopefully be in compliance with that state of Oregon tax requirements.

Great. Thank you. I think that's really our only question that hasn't been addressed. So Kathy, you can close us out.

That sounds great. I'd like to thank our speakers and our audience for joining the call. I hope you enjoyed today's topic. We'll be emailing you a summary of the webinar to our-- to all of you in a few days. We'll get that out to you by next week. And stay safe, everyone. Thank you for joining. 

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Navigating today’s work-from-anywhere world

Tags: COVID-19
Published: January 05, 2021

The U.S. Bank Corporate Programs team continued its series of virtual advisory forums with a session on October 13, 2020. The session covered the topic of navigating today’s work-from-anywhere environment. Key points included how you can build effective remote teams, sustain a strong corporate culture with your remote employees, and manage the potential impact of remote work on employee income taxes.

The session featured the following presenters:

  • Michelle Labbe
    Chief People Officer
  • David Oltman, SCRP®
    Chief Compliance Officer
    Ineo, LLC and Ineo Global Mobility Tax Services

Read a full summary of the session.

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