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How Small Businesses Can Prepare for 2024’s Biggest Remote Work Tax Trends

4 Mins read

Startups and small businesses are more mobile than ever. According to a Gusto Company News study, 78% of startups that launched in the last three years are either remote or hybrid.

What’s more, remote work is expected to pick up even more steam in 2024. According to Mercer, 59% of business leaders believe virtual assignments will increase in the next year.

With the continued prevalence of remote work, most small and growing business leaders could be exposing their companies to tax and compliance risks.

Trends Small and Growing Businesses Need To Watch Out for in 2024

If your small or growing business offers remote work opportunities, it’s worth preparing for changes in 2024. Here are a few trends to keep an eye on if you want to avoid remote work tax or compliance headaches in the coming year:

Beware of data overload

Most small business leaders have been told to collect data for years. However, accruing too much data without a clear purpose could cause problems in 2024. According to Oracle, 86% of leaders say the volume of data that currently exists is complicating their decisions.

When data piles up too fast and you don’t have a clear use case for it, that information can overwhelm tax or compliance teams. And it’s easy to overlook risky situations.

Additionally, if your business operates in some jurisdictions, such as the European Union (EU), holding personal data could run up against strict privacy laws. Navigating these types of laws can be tricky for business leaders. In fact, 55% of leaders who work in the EU and United Kingdom say they’re struggling with new privacy laws.

In short, if too much data is sitting idle at your company, it could cause compliance mistakes or privacy breaches in the coming year.

Tax collectors are cracking down on compliance

Regulatory authorities across the globe are adopting technology to monitor remote workers and enforce tax laws. In the United States, the recent Inflation Reduction Act is pushing the government to adopt automation to conduct more precise audits. Similar programs are kicking off in several places around the world — including India, where tax authorities reportedly plan to use artificial intelligence to identify tax return errors.

This upswing in enforcement could land heavily on small business leaders’ shoulders. If employees work across multiple countries or states, they may trigger corporate and payroll tax obligations in a region or wrack up tax penalties for the business and its employees. In one recent case, a business leader says he ended up stuck with an unexpected $30,000 tax bill after his remote employee secretly worked from Texas and California.

New tax laws are popping up

As legislators focus on updating tax laws for remote work, it could hit small businesses especially hard in 2024. In some cases within the US, remote workers risk being double taxed. States continue to review their tax laws and adopt changes such as implementing convenience of employer rules to mitigate the loss of tax dollars for remote workers. In international locations, countries are reviewing the way in which remote workers are taxed. For example, some EU member states have taken steps to adapt their rules to ease the social security requirements for remote workers.

How To Avoid Tax and Compliance Violations in 2024

As remote work picks up and risks rise, small and growing businesses can stay ahead of the troubling trends of 2024. Here are a few ways to help protect your business from tax violations, fines and reputational damage in the upcoming year:

1. Bridge the gap between data and technology

Want to avoid data overload? Start by mapping out a clear strategy and investing in technology before you start collecting personal data. That way, you can identify what data you need to keep employees tax-compliant and you avoid cluttering your tax team’s vision with unnecessary data.

2. Communicate tax responsibilities to employees

It’s up to business leaders to educate employees about tax obligations within different jurisdictions. For instance, if an employee is based in a no-tax state but decides to work in a state with higher taxes, such as New York, let them know about the new tax burden. That way, they can weigh their potential changes in compensation and avoid a surprise tax bill.

3. Refresh remote work policies

Corporations can’t afford to sit back and react to remote tax reporting mishaps. That’s why leaders need to adopt a more proactive approach to remote tax reporting. Here are a few ways to build a more proactive tax reporting program:

  • Refresh the company’s remote work policies.
  • Create or enforce a clear remote work approval process.
  • Start tracking and monitoring employee whereabouts.
  • Use technology, third-party advisors and internal resources to report taxes correctly from the start.

Small and Growing Businesses Can Start Planning for 2024

As remote work continues to increase, small and growing businesses could face more tax violations, compliance breaches and audits in the upcoming year. But leaders don’t have to sit back and react to the trends in 2024. By adopting a more proactive approach to remote tax, rethinking their data strategies and educating employees about new tax obligations, small businesses can protect their employees and their organizations well into the future.

Tracy Novotny currently serves as a Director for Global Tax Network. She has over 15 years of experience in the global mobility tax field providing advisory and compliance assistance for both corporate and individual clients. Her experiences include providing assignment tax planning assistance, global payroll and tax compliance services, international tax policy design and program risk review.

Remote working stock image by Andrey_Popov/Shutterstock

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