Many corporations are asking employees to return to the office following the surge in remote work that the 2020 pandemic created. When it comes to remote workers, however, it’s important to understand these mandates won’t simplify the complexities of taxation on equity compensation. In many cases, employees and benefits managers don’t realize the tax implications until it’s too late—sometimes years after the remote work took place. With fewer than 10% of workers wanting to be in the office full time, companies must proactively address these challenges to avoid unexpected tax liabilities down the road.
If businesses overlook the complexities of mobile equity taxation that are tied to remote work, they risk financial penalties, reputational damage, and unintended consequences for their employees. In this article, I break down the key tax risks for remote and formerly remote workers with equity compensation—and outline the easiest ways to help businesses stay compliant and protect their workforce.
Why does equity compensation present tax risks to remote workers?
When employees work from different tax jurisdictions, the taxation of equity compensation becomes more complex due to varying reporting and withholding requirements across jurisdictions. When an employee moves across borders as they work, it can create extra tax obligations that employees may not even realize. Equity compensation adds another layer of complexity because it vests over time—meaning tax and reporting obligations can change based on where an employee lived and worked in previous years.
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The result? Remote employees may unknowingly owe taxes on their equity compensation to another country or state, creating challenges for their employer:
- Complicated reporting: Employees may need to file multiple tax returns or navigate unique reporting rules, leading to frustration, potential penalties, or even increased employee turnover. Employers also face complex withholding requirements, which can result in extra administrative work, miscommunication, and corporate compliance risks.
- Financial penalties: Misreporting or failing to report taxes can lead to fines, legal issues, and unexpected costs for the organization.
- Talent retention risks: Unexpected tax bills or penalties can reduce an employee’s financial rewards, making them feel undervalued and more likely to seek opportunities elsewhere.
- Reputational damage: Tax and reporting violations can harm a company’s reputation among employees, prospective hires, and regulators—potentially increasing the likelihood of future audits and even risking their ability to operate in a jurisdiction
Why return-to- office mandates aren’t solving tax issues
Back-to-the-office mandates have climbed recently, with Amazon, The Washington Post, Dell, and other major corporations calling employees back to physical offices. However, many business leaders overlook a critical factor: Taxes on equity compensation can span several years. Because restricted stock units (RSUs) take time to mature, they often come with a tail of reporting obligations that can extend three years or more. In order to keep employees tax compliant, businesses must track not only where employees live and work now but also where they’ve worked in the past—and understand the tax rules for each jurisdiction.How to help protect remote employees from equity compensation tax setbacks
Employers can minimize equity compensation tax risks by taking a proactive approach. Here are a few steps to help protect the company and employees from potential tax challenges:
Refresh location reporting policies.
The rise of remote work led many employees to work from multiple locations—often without their employers’ full awareness. Without accurate location data, properly reporting taxes for equity compensation becomes nearly impossible.
To mitigate risk, companies should track employee locations not only for their current role but also across their entire equity compensation tail. Implementing a system for regular location reporting maintains consistency while supporting the efficient processing of the transaction within one business day of the transaction date, as is frequently required under securities regulations, including for all US securities (e.g., the T+1 settlement cycle).
Create processes that promote cross-departmental communication.
Accurate location data is only useful if it reaches the right teams. Once an organization gathers this information, it must confirm that it flows seamlessly to HR, equity, and payroll teams responsible for reporting, withholding taxes, and supporting employees. Clear processes for sharing this data help prevent compliance issues and reduce administrative burdens.
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Understand and follow the rules of every jurisdiction.
To report equity compensation tax correctly, organizations must understand the laws and reporting requirements in every location where an employee has worked. This often requires guidance from an internal tax specialist or a third-party global tax professional to maintain compliance and avoid costly errors.
Planning ahead to avoid equity compensation tax pitfalls
Back-to-office mandates may keep more employees in one location, but they don’t eliminate past equity compensation tax obligations for remote workers. Additionally, many companies will continue to allow remote work without a required review and pre-approval process—potentially creating ongoing tax compliance risks for both employees and employers.
To stay ahead of these challenges, corporate leaders should:
- Reassess and strengthen employee location tracking policies.
- Verify that updated location data is shared with equity and payroll teams.
- Leverage internal or external tax professionals who understand jurisdictional compensation tax rules.
By taking these proactive steps now, businesses can protect both employees and the company from costly tax complications down the road.
Tara Hagen, CPA, FGE, has been with GTN since 2019 and is a Director and equity services leader. She has over 20 years of experience in providing global mobility tax compliance and consulting services along with equity compliance and consulting. The range of services Tara provides to her clients includes both domestic and international payroll, equity compensation, and global and domestic mobility policies. Having lived and worked abroad, Tara has a global mindset and is a true partner for her clients and a mentor among her colleagues. Tara is known for seeing mobility tax matters from various angles, including from the client’s, mobile employee’s, and tax authorities’ perspectives.
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