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Arconic Employees Working Remotely May Run into These Tax Hurdles

Tax withholding and filing status should be updated for Arconic employees moving to remote work to avoid surprise liabilities, says Brent Wolf, of The Retirement Group, a division of Wealth Enhancement Group.

With remote work continuing to reshape the workforce, Arconic employees need to be aware of their tax obligations across states and having a tax advisor can help with that, says Kevin Landis, of the Retirement Group, a division of Wealth Enhancement Group.

What is it that we will discuss here:

Tax consequences of working from home including withholding and filing returns in several states.
Deductions for remote workers affected by the Tax Cuts and Jobs Act.
Considerations for employers with remote workers across states.

This COVID-19 pandemic also forced businesses into remote work and amplified a trend that was already taking place. Even before the pandemic, more Americans worked from home. From 2005 to 2019, more than 216% of all companies worldwide work remotely (GlobalWorkplaceAnalytics.com, 2021). But with millions starting to return to work, telecommuting part-or full-time is becoming standard (McKinsey and Company, 2022). But working from home has its benefits - less commuting and more flexible schedule - but it comes with tax responsibilities. Arconic employees should know about these changes in the workforce and prepare accordingly.

These four tax considerations apply whether you work from home or contract out remote workers for a company like Arconic:

Withholding Tax from Wages Remote working has helped many people relocate to new states in metropolitan areas and smaller cities. This mobility can cause withholding errors if you fail to notify your payroll department of your new home address. And remember that workers must have taxes withheld based on the state's tax rules wherever their employer is located. Not updating your withholding information could mean an unexpected Tax bill or underpayment penalties come Tax Day.

Some states also require that employers withhold taxes from nonresident employees' wages. For example, New York requires employers to withhold state income tax from nonresidents' wages.

Filing Returns in More than One State. In two or more states you may have to file a tax return for each state you work in. It's because many states require nonresident employees to pay state income taxes if they earned money in that state, wherever they lived. A few states even require a tax return if you worked anywhere within their borders - even on a business trip.

Note also that residents or workers of any of the nine U.S. states that do not collect income tax - Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming - will not be required to report their income to that state.

Deducting Business Expenses, The Tax Cuts and Jobs Act of 2017 eliminated several miscellaneous Tax deductions, including unreimbursed business expenses, through 2025. Therefore, expenses you incur while working from home that are not reimbursed by your employer cannot be deductible on your taxes. In past tax law, workers could deduct some out-of-pocket work-related expenses greater than 2% of adjusted gross income. But that deduction will return in 2026.

In contrast, if you are self-employed, you can still deduct many business expenses on Schedule C of your Form 1040.

We Have Workers in Several States. You own a business in one state but have a remote employee in another state - you may need to register your business in that employee's home state. It involves estimated taxes, tax returns, and other reporting to the state. If this is you, consult a tax professional who knows state and federal tax laws.

To summarize - taxes are complicated - and the trend toward remote work has only added fuel to the fire of understanding your tax obligations as an employee or an employer. For those scenarios that apply to you, we recommend that you speak with a tax advisor about how to best navigate this complex landscape.

It is obvious that remote work has many benefits including flexibility and low cost. It does bring up tax issues, however. Being informed and seeking advice can help people and businesses comply with tax laws and avoid potential problems.

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Research suggests that working from home may benefit older people's mental health. For those nearing retirement age, remote work may reduce stress and increase job satisfaction (University of Michigan, 2022). This finding applies especially to our target audience of 60-year-olds who are Arconic workers about to retire or already-retired retirees. Aware of possible tax issues associated with working from, this group can also protect their financial interests while enjoying less stress and better job satisfaction when approaching retirement age.

Working from home is like going into unknown waters. As with sailing overseas, remote work means more flexibility. But like dangerous seas, there are hidden tax reefs to navigate. Take those tax questions as your personal compass when working from home. Like a seasoned sailor updating charts and course, you need to update your tax withholding and filing methods when you switch to remote work. Doing otherwise may trigger tax storms and financial penalties. Stay alert, hire a tax pro as your first mate, and enjoy your remote work adventure.

Sources:

Fregeau, Harrison. 'Personal Income Tax Implications of COVID-19 & Remote Employment.' Review of Banking & Financial Law , vol. 40, 2021, www.bu.edu .
Pearson, Brian T. 'How the Increase in Remote Employees Due to COVID-19 has Impacted Local Income Tax Revenues for U.S. Cities.' University of Kentucky , 2023, uknowledge.uky.edu/mpampp_etds/421.
'Charting a New Fiscal Course for Hawaii: Fiscal Architecture Approach.' UHERO , 2021, www.uhero.hawaii.edu .
'Remote worker state income tax implications.' Cornell University Division of Financial Services , 2020, finance.cornell.edu.
'Considering the impact of Remote Work on Income Tax Refunds: Michigan Municipal Governments.' Michigan State University , 2022, www.canr.msu.edu .

What retirement benefits and options are available to employees of Arconic Corporation under the Arconic Corp. Pension Plan A, and how do these benefits change based on factors such as age, service length, and retirement category? Employees of Arconic Corporation should understand their eligibility requirements for normal retirement, early retirement, and disability benefits as outlined in the company's pension plan documentation.

The Arconic Corp. Pension Plan A provides retirement benefits based on a formula that considers average earnings and service length, with normal retirement eligibility at age 65 and at least five years of service. Early retirement is available at age 55 with 10 years of service, with benefits reduced based on actuarial assumptions. Disability benefits are available after 10 years of service, and preretirement death benefits offer 50% of accrued benefits to surviving spouses(Arconic Corporation_ Ja…).

How does the frozen state of benefits and service accruals impact current and future retirees at Arconic Corporation? Employees should evaluate how the freeze, effective April 1, 2018, affects their retirement planning and what measures they can take based on their individual circumstances to optimize their retirement benefits.

The frozen state of benefits and service accruals, effective April 1, 2018, means no new service credits or compensation increases are factored into pension calculations for current employees. This freeze affects retirement planning as employees must now rely on frozen benefits and other savings plans to meet retirement needs. It’s important for employees to reassess their financial goals and consider additional investments to optimize retirement benefits(Arconic Corporation_ Ja…).

In what ways can Arconic Corporation employees ensure they meet the requirements for spousal benefits outlined in the pension plan, especially regarding preretirement and postretirement scenarios? Understanding the specifics of eligibility and benefits, such as the surviving spouse benefit calculations, is crucial for employees planning for retirement.

To ensure eligibility for spousal benefits, employees need to meet certain requirements. Preretirement surviving spouse benefits require at least five years of service, and postretirement spousal benefits reduce the participant’s monthly benefit by 5%, with 50% of the reduced amount paid to the spouse if the participant dies first. Employees should understand these provisions to plan for their family’s financial security in retirement(Arconic Corporation_ Ja…).

What are the implications of the actuarial assumptions used by Arconic Corporation in valuing its pension obligations, and how do these assumptions affect the funding of the retirement plan? Arconic Corporation employees should examine how changes in interest rates and mortality tables influence the company's ability to meet its pension obligations.

Actuarial assumptions used in Arconic Corp.’s pension valuations, such as interest rates and mortality tables, directly impact the funding of retirement plans. Changes in these assumptions can affect the pension plan’s obligations and the amount of required contributions, making it important for employees to understand how these factors influence the stability and sufficiency of their retirement benefits(Arconic Corporation_ Ja…).

Can you explain the process by which Arconic Corporation employees can appeal decisions related to their pension benefits, and what support does the company provide during this process? Understanding the proper channels for appeals and the types of documentation required can be vital for employees facing issues with their pension benefits.

Employees can appeal pension benefit decisions through Arconic Corporation’s formal process, which includes submitting an appeal with supporting documentation. The company provides guidelines on what documentation is required, and employees should follow these closely to ensure their case is reviewed thoroughly. The support provided can include detailed responses to clarify benefit calculations and decisions(Arconic Corporation_ Ja…).

What resources are available to Arconic Corporation employees to help them make informed decisions about their retirement benefits, and how can they access these resources efficiently? Employees should know where to find comprehensive materials and support services concerning their retirement plans.

Arconic Corporation offers various resources to assist employees in making informed decisions about their retirement benefits. Employees can access comprehensive plan documents, financial planning tools, and counseling services through the company’s HR department and retirement plan administrators to ensure they fully understand their options(Arconic Corporation_ Ja…).

How does the Arconic Corporation define "average earnings" for calculating retirement benefits, and what methodologies are in place to ensure accuracy in these calculations? Understanding the basis for average earnings will allow employees to better project their pension benefits and prepare for retirement.

Average earnings, used in calculating retirement benefits, are defined as the average of the five highest consecutive calendar years of compensation within the last ten years for most participants. For certain participants, different rules apply based on service and plan conditions. Employees can review their earnings history to ensure accurate calculations and projections for retirement planning(Arconic Corporation_ Ja…).

What criteria does Arconic Corporation use to determine eligibility for deferred vested benefits, and how can employees maximize their advantages in this area? Employees need to be aware of the vesting schedule and how to plan for potential career transitions while maintaining their benefits.

Eligibility for deferred vested benefits in Arconic Corporation’s plan requires five years of service, and benefits can commence as early as age 55, with reductions based on actuarial calculations. Employees should plan career transitions carefully to maximize their vested benefits, especially when considering leaving the company before retirement(Arconic Corporation_ Ja…).

How can Arconic Corporation employees prepare for the potential tax implications of their pension benefits upon retirement, especially in light of IRS regulations for 2024? Being informed about tax strategies related to retirement income can significantly enhance retirees' financial wellbeing.

Employees preparing for retirement should understand the tax implications of pension benefits, particularly in light of IRS regulations for 2024. Strategies such as tax deferral and proper timing of distributions can help minimize the tax burden on retirement income, significantly enhancing financial outcomes(Arconic Corporation_ Ja…).

What contact methods does Arconic Corporation provide for employees wishing to learn more about their pension plan details, and how can employees best utilize these methods to get their queries resolved? Understanding the effective ways to communicate with the company for assistance is key for employees navigating their retirement benefits.

Arconic Corporation provides multiple contact methods for pension-related inquiries, including direct access to HR representatives and pension plan administrators. Employees are encouraged to utilize these resources effectively by preparing questions in advance and keeping detailed records of their communications for follow-up and clarity(Arconic Corporation_ Ja…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Arconic has announced a major restructuring plan that includes significant layoffs across its North American facilities. The restructuring is aimed at streamlining operations and reducing costs amid ongoing economic uncertainties. Additionally, Arconic is revising its pension and 401(k) benefits in response to shifting market conditions and regulatory changes.