The COVID-19 pandemic has had a direct impact on the mobility industry, causing global disruptions to companies and the individuals they employ. In the new work environment the pandemic has made necessary, it is not just the employee's individual needs that we must consider, but also the additional challenges that the pandemic has presented for companies. These challenges have caused many to pivot quickly, make tough decisions, and becoming more innovative to keep daily life moving both personally and professionally. To provide visibility into the impact this has had on mobility programs, Aires has implemented specialized tracking to categorize and properly code expenses incurred as a result of the pandemic. By understanding what mobility costs are related to COVID-19, companies may also be able to take advantage of current U.S. tax law and consider some payments as non-taxable Qualified Disaster Relief Payments (QDRP).
QUALIFED DISASTER RELIEF PAYMENTS
On March 13, 2020, the COVID-19 pandemic was declared a national emergency by President Trump. Under this declaration, the Robert T. Stafford Disaster Relief and Emergency Assistance Act was enacted, allowing employers to make non-taxable disaster related relief payments to employees in need. Under I.R.C. §139(b)(1), additional mobility costs that are reimbursed or paid to cover reasonable and necessary personal, family, and living expenses are qualified.
Items which may be considered non-taxable under this law include but are not limited to:
- Extended or new temporary living for those "stuck" in a location or unable to move forward with their permanent residence
- Higher commuter costs (taxi/Uber) to avoid mass transit
- Transportation costs to return employee to home country
- Housing and transportation costs for additional family members (e.g., college students having to return home)
The article Employers Can Make Tax-Free Disaster Relief Payments to Employees by Peter Scott, Esq., of the Worldwide ERC® is a great source for additional information. Please note it is always best practice to work with certified tax consultants on tax related topics.
The advantage of providing Qualified Disaster Relief Payments is that companies will save on gross-up costs. Since these types of payments are non-taxable, they will be excluded from the employee's income; it does not create an additional tax liability and may also be deducted by the employer in their corporate filing.
Whether corporations are providing an extension of time an employee has to use their benefits, providing an exception to allow an employee to drive instead of fly for their final move, or providing an additional two weeks of temporary living for an employee, Aires is able to track and code those exceptions specifically as a result of COVID-19 as opposed to a regular exception that is outside or greater than policy.
QDRP EXPENSE TRACKING AND PAYROLL REPORTING
Although many companies may have provided an exception due to the pandemic, the expense itself may not qualify as a non-taxable Disaster Relief Payment. For those expenses that do qualify, Aires has created specific expense coding to be utilized on those items and are further categorized as living expenses, replace/repair costs, travel Expenses, shipment/storage of household goods, and other expenses.
It is a valuable practice to capture as many attributes as possible when recording employee data so that it is easy to dissect as needed. This is especially helpful in cases where it may help companies identify cost savings within their programs (such as considering a payment that qualifies as a disaster relief payment). At Aires, we have tracked this throughout the year and have worked with our internal teams and clients to ensure all COVID-19 related exceptions were recorded appropriately and can be accessible through reporting.
For more information, please reach out to your Aires representative.