Coping With the Tax Challenges of Relocation and Mobility: A Q&A With EY’s Lynn Pettus

Mobility and relocation are not only part of an employee's financial life, but also have complicated tax implications.


Today’s workforce has grown increasingly mobile, with more and more employees traveling or changing their work location domestically. This increased mobility brings new financial challenges for employees. FEI Daily spoke with Lynn Pettus, National Director of EY’s Employee Financial Services, on how to build loyalty by helping employees through difficult transitions in their career.

FEI Daily: What are the tax challenges that come out of an increasingly mobile workforce?


Lynn Pettus: From an employee perspective, if you're thinking about filing your federal return and your state return, that's fairly straight forward and employees are used to that. But now, employees are being required to file in multiple states, pay in multiple states, and try to figure out how the credits work. It can be fairly daunting.


There are increased filing requirements on a state level. More and more states are starting to pay attention to the number of non-residents that come and work in the state. It's incumbent upon the employers to actually track that information and report it. There are increased state tax liabilities. There's differentiation between higher tax liabilities, out of state versus your home state and allocating those incomes. It’s important to understand what tax credits can be applied when you're filing your tax return. There are additional implications, as well, from an alternative minimum tax perspective.

FEI Daily: What are the questions and concerns that arise when employees are going through relocation?

Pettus: It’s a little bit different from the mobility side. Now, all of a sudden, you're being asked to completely relocate your family. It’s really about home purchase, cash flow, and cost of living. Some questions that come up are ‘How do I deduct my moving expenses?’ Now you have to sell your home, so there’s the home sale exclusion potential. What other types of taxes, other than state tax, do you need to consider? Real estate tax? Property tax? Some states, like Texas and Florida, actually don't have a state tax.

FEI Daily: How is it currently being managed and how can it be managed for effectively?

Pettus: Many companies do it through time tracking and payroll. At this point it’s really self-reporting, from an employee perspective. There are technologies being put in place to help track that information, so that it can be reported back to the states separately. Then, obviously, the employer needs to report that information. That gives the states the information, that they require, so employees can file there.

FEI Daily: What do HR and executives need to understand about this issue? Why is it so important?

Pettus: I think the biggest is the tax implications and business risk. There are obviously requirements around tax law, filings, and tracking. Beyond just the tax answer, you really have to look at the workforce itself and what the employees are going through.

By offering assistance to them, that gives them more comfort with the decision they're making. By giving them a resource, it really does help with productivity and risk management. It’s not a retention tool, but it's something that definitely builds loyalty by helping an employee through a difficult transition in their career.

This is clearly not an issue that is shrinking, it's growing. The Global Business Travel Association the number of business trips has now topped over 488 million trips in the U.S., on an annual basis. We used to look at this as being unique to C-level individuals. But we're seeing now, that because of all the travel that's being required of folks, it really is pushing down into the ranks. This is a real issue for employees of corporations. It's not just a C-level issue anymore. There's only going to continue to be more confusion, unless there are resources that are offered to assist.