It’s time to stop overpaying taxes for your newly distributed workforce
Presented by Topia
In the COVID-driven overnight shift to remote work, scores of employees abandoned their downtown offices and headed for homes in the suburbs and beyond. In cities like San Francisco, Seattle, New York, and LA, bustling offices have become ghost towns.
And with companies like Twitter, Square, Facebook, and Google offering extended or even indefinite work-from-home flexibility, it’s unlikely those facilities will be humming with activity again anytime soon. In New York, Wall Street firms are pondering a permanent exit. Pinterest has canceled its new lease on a brand new HQ in San Francisco, and REI’s new, yet-to-be-occupied HQ campus in Bellevue is up for sale.
Mass exodus = Municipal overpayment
This mass exodus out of cities has undoubtedly left many companies drastically overpaying municipal taxes. In San Francisco alone, companies are subject to three different taxes related to employees’ working location: a 0.38% payroll expense tax, up to 0.56% gross receipts tax, and up to 0.60% homelessness tax, in addition to anticipated tax increases to make up for 2020/2021 loss of municipal revenue. And in NYC, partnerships and other pass-through entity structures are subject to the 4% UBT tax on income earned within the city’s borders..
That means that even if just 50% of your staff are now working remotely from outside the city limits, you could be significantly overpaying. And, reducing your tax liability means direct savings that could be crucial to business survival right now, or at the very least, provide much-needed extra capital to reinvest in growth.
Potential big savings, if you can prove it
But, don’t expect city governments to simply take your word for it. Facing budget shortfalls due to the economic downturn, it’s likely that government audits and strict enforcement will ratchet up. In order to substantiate filings and provide adequate proof to defend a legitimate tax position, companies need robust, real-time solutions to track and report on employee location.
“Tax-savvy companies with business activity in the City of San Francisco should consider the extent compensation drives the payroll and gross receipts taxes. Taxpayers can realize substantial tax savings by identifying work performed outside of the city limits,” according to Eric M. Anderson, Managing Director, Andersen Tax. “We have seen millions in overpaid tax related to over-reporting San Francisco compensation. A technology platform that can identify work location with a high degree of accuracy is a useful tool to substantiate tax reductions.”
Track, report, and pay accurately with Topia
That’s where technology comes in. With Topia Compass, companies can identify, track, and report on employee location for remote workers and business travelers to potentially avoid significant tax overpayments for work performed outside city limits.
For example, let’s say a San Francisco-based professional services firm has $60 million in annual revenue, $30 million in annual payroll expense, and owes $800,000 to the city during normal in-office operation. But since the onset of COVID-19, 50% of its employees are now living outside the city limits. Moving to remote work can mean major savings: with the help of Topia to track staff location, the company would be able to cut its tax liability by 0.66% of its total payroll and avoid overpaying nearly $200,000. Adding to the savings, Topia’s simple interface is able to drive significant efficiency and productivity gains with an audit-ready solution for confidence and peace of mind.
Built for the new world of work
Topia provides real-time workforce location data based on numerous sources, including: documented travel, VPN usage, calendar integration, and GPS. Its highly accurate and audit-ready reporting provides instant data both workforce-wide and employee-specific that helps companies avoid lengthy, costly audits and potential penalties for underpayment.
To make location management easy for HR staff, Topia integrates directly with a broad range of leading local legal and tax firms for efficient reporting, filing, and payments. Plus, it’s intuitive, consumer-style interface makes it easy for anyone to generate reports and clearly understand tax exposure with no advanced tax, finance, or legal expertise required.
In addition to helping companies stop overpaying gross receipts and payroll taxes now, Topia enables firms to adapt to the “new normal” distributed workforce. With 4 out of 5 CEOs saying they expect remote work to grow, companies need to prepare for the long haul. With Topia onboard, tracking employee location and accurately reporting and paying taxes is easy, no matter where your staff decides to go.
So, if it’s that easy, why haven’t more organizations implemented this kind of real-time tracking solution? Until now, many only had a small portion of remote workers. Of course, COVID has changed all that and the tiny portion is now working in the office. Others mistakenly believed it would require a massive, costly tech investment. Certainly, launching a traditional Big 4 solution would be, but with Topia Compass, companies can be up and running in under 30 days. And, with potentially hundreds of thousands of dollars in tax savings on the line, the solution could pay for itself many times over in just a matter of months.
To learn more about how Topia Compass can help drastically lower your municipal tax bill in the new world of remote work, visit www.topia.com.
Steve Black is Chief Strategy Officer at Topia.
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