According to the Mastercard Economics Institute’s travel report “Travel 2022: Trends & Transitions,” business flights have risen to levels not seen since 2019. This is one of many reports pointing to the comeback of business travel in the United States. Is your organization and workforce prepared?
This article covers the comeback of U.S. business travel and the tax implications organizations must consider, including U.S. Domestic Payroll withholding.
Business Travel Comeback
The signs of a comeback are everywhere! According to the latest reports, a year-over-year surge of 38% is expected in 2022, bringing global business travel spending to over $1 trillion.
Headlines pointing to the resurrection of U.S. business travel are published almost daily.
- Global Business Travel Association reports that three-quarters of companies plan to resume domestic travel, and just over half plan to resume international travel in the next three months.
- Bloomberg News shares that travel purchases for business- and premium-class seating on flights are starting to rise again.
- CNBC reports that for the first time since the pandemic, leisure and business flights surpassed 2019 levels.
With business travel top-of-mind for organizations and employees across the country, now is the time to address the potential risks of domestic business travel in a world that embraces remote and flexible work.
US Domestic Business Travel Tax Risk
Business travel creates substantial tax risk and opportunity for audits regardless of the shape and size of the organization. Tax exposure is the dollars at risk due to where work takes place. It is the amount owed to a tax authority in taxes plus additional penalties and interest. In addition to federal tax, forty-three states impose a tax on the income of individuals. And each state has its own guidelines around tax withholdings. With increased remote and flexible work alongside the return of business travel, managing tax withholding obligations becomes an incredibly complex task.
Topia analyzed the historical travel data from 30 organizations to understand the potential tax risk due to their US domestic business travel population.
Here’s what we uncovered.
- Technology organizations tend to have the highest percentage of business travelers compared to their total workforce
- Financial Services organizations tend to have the largest potential tax exposure
- Even the smallest business travel program with 350 unique business travelers had half a million in tax exposure and failed to allocate over $4M in compensation properly
- The most extensive business travel program with close to 20k business travelers faced over $30M in tax exposure and over $150M in unallocated compensation
Manage Payroll Withholding Compliance
Having the right technology in place will help you remain compliant and avoid audit pain. Topia Compass’s powerful technology intelligently determines where employees are working, calculating necessary withholdings and automatically feeding that information back to payroll and finance teams in the form of live dashboards and automated reports. Topia Compass provides audit-defensible data and the insights needed to accurately withhold taxes in line with international and US domestic regulations.
Key Topia Compass benefits:
- Know where work is getting done through Topia’s market-leading location awareness engine
- Provide visibility of employee footprint at a city, state, or country level to streamline multi-jurisdictional payroll withholdings
- Manage risk for your globally distributed workforce and business travelers - know when you are approaching withholding thresholds
- Easily withhold taxes for non-resident workers in states and countries where employees have crossed thresholds
- Access audit-defensible data and minimize the risk of non-compliance
A tool like Topia Compass empowers organizations to identify tax risk from traveling proactively and distributed workforces and ensure that appropriate withholdings occur -protecting businesses and employees from audits and fines.
To see how Topia Compass can help eliminate tax risk from your business travel program, visit topia.com/request-a-demo.
