Global Mobility: Year-End Payroll Considerations – What You Need to Know

At a glance

• The main takeaway: Businesses with multinational workforces should establish a payroll review process that allows them to review and potentially update employees’ payroll information for accuracy and compliance prior to the new year.
• Impact on your business: Employers must stay compliant with key tax changes and payroll considerations when preparing and filing Form W-2 to report wages paid to their globally mobile employees.
• ACT NOW. Reach out to Aprio’s Global Mobility Consultants to learn how we can help your business with tax compliance and payroll adjustments before the looming December 31^st deadline to remit tax withholdings.

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The full story:

It is important for all businesses to perform a year-end payroll review for accuracy and compliance purposes — but the practice is especially critical for those with globally mobile workforces. Your year-end payroll review should incorporate all foreign tax payments, assignment related allowances and adjustments, for Federal, State, and FICA taxes prior to the December 31^st deadline.

Good news: Aprio’s Global Mobility Consultants can help you and your multinational business initiate payroll adjustments prior to year-end. Here are a few key factors you should know before enlisting our assistance:

Tax compliance for expatriates (expats)

Payroll considerations and reporting/withholdings adjustments differ depending on where the employee is both residing and working. Employers must consider the various different payroll tax rules in place for accurate payroll reporting. An employee’s payroll structure depends on many factors besides work location:

• Is their international arrangement temporary or permanent?
• Will they be residing in one place, or will they be relocating eventually?
• Are travel costs to the new work location taxable?
  • Will the employer or the employee be responsible for the taxable aspects of work travel?

Not all employers have payroll capabilities in places they assign their employees to work. Therefore, employers may need to think about the administrative costs of setting up payroll capabilities in those locations to streamline reporting for future years.

A year-end payroll checklist for multinational businesses

Producing year-end payroll deliverables can be daunting with all the tax changes and payroll adjustments that your business made throughout the calendar year. As you approach the last payroll cycle of 2024, it is important to verify, determine, and order the items you need to help ensure the process goes smoothly. Some items of importance to verify are listed below:

• Verify employee, business, taxes, salary, and benefits information.
• Determine bonuses if applicable.
• Order the necessary tax forms from your payroll service provider (W-2, W-3, and other tax forms).
• Identify all states or countries for which taxes may be due.
• Determine if payments were made on behalf of an employee outside of payroll (i.e., housing, car lease, foreign taxes, etc.) and the associated tax/payroll obligations for these payments.
• Calculate gross-up taxes and have them remitted to the respective tax authorities ahead of December 31^st.

With the looming deadline of December 31, 2024, all information must be deemed correct, up-to-date, and compliant before you submit it. Once you have checked off the list above, there are still certain tasks you must complete in preparation for the next fiscal year:

• Finalize all payroll-related information before submission.
• Distribute W-2 forms to all employees for transparency on their income throughout the year.
• File payroll tax forms with the IRS.
• Review the upcoming payroll calendar year and make any adjustments as needed.

What are some of the payroll tax forms employers need to know about?

There are specific tax forms you must complete and comply with, depending on the employment scenario. Failure to submit the necessary tax form or providing inaccurate information could result in penalties and might trigger a payroll audit:

• Form W-2: Reports employee wages and withholdings to the IRS.
• Form 940: Determines the employer’s federal unemployment tax (FUTA).
• Form 941: Filed quarterly and reports the share between the employer and employee on Social Security and Medicare (FICA) taxes.
• Form 944: Employers that have payroll tax liability of no more than $1,000 annually and expect to pay $5,000 or less in total employee wages for the year.
• 1095 and 1095-B: Companies that have over 50 full-time employees must submit Form 1095, while self-insured small businesses must submit Form 1095-B, which states the essential benefits offered to employees.

The bottom line

Some multinational companies prefer to review payroll on a quarterly basis, while others prefer to do it all at once at year-end. The frequency you choose will depend on your payroll provider, and how often they want to perform your payroll cycle computation.

At Aprio, we recommend to our clients that employers review their computed payroll cycle quarterly, so our advisors can give proactive and timely recommendations. The process is complex, but Aprio is here to help you and your business stay compliant. Reach out to our professional Global Mobility Consultants for guidance on tax compliance and payroll adjustments before the December 31^st deadline.