How many renminbi are in a dollar? Expats improperly report worldwide income

In addition to cultural and language training, family support and housing assistance, employers sending expatriates and families overseas also may want to tuck a currency converter and copies of Turbo Tax into expats’ luggage.

New survey results from Mercer show that, although most likely unintentionally, the most serious compliance issue noted by almost two-thirds (61%) of respondents involved tax return revisions caused by improper reporting of worldwide income by expatriates.

While forgiveable, such errors aren’t cheap, as one-quarter (25%) of survey respondents cited fines and penalties imposed on expatriates due to inaccurate reporting of income as another trouble spot.

Further, employers responding to the survey also cited the challenges posed by tax audits as a result of expats under-reporting income. "The growth in recent years of extended international business travel has only exacerbated the difficulties faced by employers in tracking income," says Geoffrey W. Latta, a Mercer partner, "as well as meeting both home- and host-country tax and immigration laws."

Making matters worse, most respondents also lack procedures or systems in to pinpoint international business travelers who often fly under the radar.

In fact, almost half (45%) do not track the movement of business travelers at all, and 59% do not have a policy or procedural requirements to ensure that such employees track their own travel.

While the survey findings, plucked from some 240 U.S. and Canadian employers in Mercer’s Global Mobility Compliance Issues Survey, don’t offer good news in terms of taxes and tracking, all is not lost. Employers with expats can take notes from some of their peers who do have solid reporting systems in place.

Among employers that have an existing international travel policy, 67% make sure the policy specifically states the employees’ responsibilities for reporting travel, but also highlights potential immigration and tax implications should they fail to do so.

Moreover, 38% will not allow individuals to book travel unless they agree to follow the rules regarding travel reporting, and another 14% withhold reimbursement of expenses or payment of per diems unless the employee submits a timely travel report.

All good procedures, and far less costly than ticking off a foreign host government, I’d say.

"Noncompliance by expatriates with respect to accurate and timely income reporting puts an employer at risk," says Latta. "In serious cases, the company faces potential fines, a tarnished image in the public arena and difficulties with the host-country government — unwelcome headaches for a company striving to balance the needs of management and expatriate families."

Got any expats flying the friendly skies in the near future? What policies/procedures does your company have in place to make sure income is reported accurately? Sound off in the comments.

Then stay tuned for the November EBN, which features a report on maintaining successful global mobility programs.