Efforts to contain the 2019 novel coronavirus (COVID-19), declared by the World Health Organization as a pandemic, have led many employers (whether voluntarily or pursuant to government action) to change the normal working environment and operating procedures. It’s no longer business as usual as employers and workers around the United States formulate and adapt approaches in combatting this evolving disruption. Employer-related COVID-19 pandemic response efforts can also raise complicated tax considerations for individuals and employers.
This report focuses on the initial approaches that employers are taking, such as increased telecommuting, and the resultant tax considerations. Subsequent economic implications are beyond the scope of this report.
A key component of the U.S. Centers for Disease Control and Prevention (CDC) mitigation strategy [PDF 330 KB] to prevent the spread of disease includes “social distancing,” and thus many companies are encouraging or even requiring their employees to work from home.
In addition to social distancing from the office, employees may look for other transportation opportunities to avoid unnecessary contact with the general public.
Another response to the COVID-19 outbreak is restrictions on travel, specifically travel in and out of the United States. Travel restrictions apply more broadly to and from certain locations, and in others, returning home may be delayed as a result of a mandatory quarantine. For employees who are traveling away from home on business and are delayed from returning, there may be questions around how to characterize the expenses incurred for the remainder of the travel period—namely, whether they constitute business travel that is excludable from income rather than personal travel that must be treated as compensation if paid for by the employer. Employers may also incur non-routine travel expenses related to relocation of employees on assignment in higher risk locations. Additional tax complications can arise if extension of the trip crosses the one-year-away threshold, potentially taking the trip out of the “temporary” travel category.
General “tax home” rules still apply when considering business travel, but may be further complicated by the realities of working remotely. To the extent employees qualify under the home office deduction rules of section 280A (though the deduction itself has been suspended under the TCJA), the individuals may be able to consider their personal residence to be their tax home when considering whether expenses are incurred for travel away from home. As always, tax considerations related to travel away from home are highly fact specific and must be considered on a case-by-case basis. In addition, employers may need to consider the various legal and regulatory requirements in each jurisdiction where employees are traveling or assigned and continue to monitor any changes in those rules as the situation evolves.
In times of emergency, whether on a global or individual scale, employers often take actions to facilitate assistance for employees in need. In some instances, this takes the form of employer-provided benefits and in others the employer facilitates employees helping one another.
Read more about employer assistance opportunities in times of national emergency, including through charities and foundations in TaxNewsFlash.
An infectious disease outbreak naturally raises questions around crafting communications that maintain individual privacy as well as making health benefits available without creating any undesirable consequences in other realms.
As a result of the COVID-19 outbreak, many businesses are faced with uncertainties and closures, and individuals are experiencing lost wages and the prospect of rising medical bills. When the greater community or individuals experience a financial downturn, additional concerns may arise for employers.
Although some of the relevant tax concerns for employers in the current environment are outlined above, this is by no means an exclusive list. In addition, there are likely numerous legal and regulatory considerations that are increasingly relevant to employers in light of the current events. Employers need to continue to monitor updates and remain in contact with their advisors in developing policies and taking action in response to the global pandemic.
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