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UPS Employees Working Remotely May Run into These Tax Hurdles

Tax withholding and filing status should be updated for UPS 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, UPS 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. UPS 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 UPS:

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 UPS 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 .

How can employees take full advantage of the retirement benefits offered by UPS, including the pension plan enhancements implemented in 2024, and what specific eligibility criteria must they meet to secure these benefits? In your experience, how have changes in the UPS pension plan over the years, especially the recent increases to service pension benefits, impacted the financial planning of UPS employees nearing retirement?

To fully take advantage of the UPS retirement benefits, including the pension plan enhancements implemented in 2024, employees must meet specific eligibility criteria, such as length of service and retirement age, which are outlined in the company's pension plan documents. Recent increases in service pension benefits, particularly for employees nearing retirement, have allowed UPS workers to better secure their financial future, giving them a more stable foundation as they transition out of the workforce. These changes have made financial planning more predictable for those close to retirement.

What are the steps that part-time employees at UPS need to follow to transition to full-time status, and how does this transition affect their eligibility for the UPS Pension Plan? Additionally, can you outline how the accrual of Credited Service works for both part-time and full-time UPS employees under the current plan rules?

Part-time employees at UPS must follow an established process to transition to full-time status, often based on seniority, availability, and performance reviews. Once they transition to full-time, their eligibility for the UPS Pension Plan improves, allowing for faster accrual of service credits. Accrual of Credited Service for part-time employees is typically prorated based on the hours worked, while full-time employees accumulate service credits more quickly, based on a 40-hour workweek under the current plan rules.

Considering the rise in healthcare costs, what healthcare options are available to UPS employees upon retirement, and how do the TeamCare plans differ between full-time and part-time retirees? How does the retiree medical coverage through TeamCare ensure that UPS employees maintain health insurance access without significant financial burden after retirement?

UPS offers comprehensive healthcare options through TeamCare for retirees, which vary for full-time and part-time employees. Full-time retirees generally receive more extensive coverage, while part-time retirees may have more limited options. TeamCare ensures that UPS retirees have access to affordable healthcare coverage post-retirement by providing plans designed to reduce the financial burden of rising healthcare costs, helping retirees maintain health insurance with manageable out-of-pocket expenses.

How does the UPS pension plan accommodate employees who have worked in multiple states or for different employers within the Teamsters system? What provisions are in place to ensure that their service credits are recognized and valued, particularly for those who may approach retirement age with a patchwork of employment history?

The UPS pension plan accommodates employees who have worked in multiple states or for different employers within the Teamsters system by recognizing their service credits across various jurisdictions. This ensures that even employees with patchwork employment histories can count their service toward pension eligibility, helping them qualify for retirement benefits despite moving between employers or locations within the Teamsters network.

What specific provisions exist for retirees at UPS who may choose to return to part-time employment post-retirement? Can you detail how this affects their pension benefits and any other retirement-related income they might receive, alongside UPS's policies regarding reemployment for retirees?

UPS retirees who choose to return to part-time work after retirement can do so under certain conditions without affecting their pension benefits. However, there may be limits on how much they can work without reducing their pension income. UPS’s policies on reemployment allow retirees to maintain some of their retirement-related income while taking on part-time roles, ensuring financial stability alongside continued employment.

How can employees at UPS navigate the process of filing a grievance if they feel their retirement benefits have not been administered fairly? What are the resources available to them, and how does the grievance procedure relate to the overall benefits they receive under the UPS pension and welfare plans?

If employees feel their retirement benefits have been unfairly administered, they can file a grievance through the UPS grievance procedure. This process often begins with discussions between the employee and management, with the option to escalate the issue to the union for formal dispute resolution. Resources such as union representatives and detailed plan documents are available to help employees navigate these disputes under the UPS pension and welfare plans.

With the introduction of new benefit contribution rates in 2024, how do these changes reflect UPS's commitment to its employees' financial futures? In what ways are employees encouraged to participate in decision-making regarding their benefits, and how might this shift impact employee satisfaction and retention rates at UPS?

The new benefit contribution rates introduced by UPS in 2024 reflect the company’s commitment to securing the financial futures of its employees. These changes encourage employees to be more engaged in the decision-making process regarding their benefits, which can lead to greater satisfaction and retention. UPS fosters this involvement by providing clear communication about how benefits are structured and how employees can contribute to their long-term financial health.

For employees looking to enhance their retirement savings beyond the UPS Pension Plan, what additional options are available, such as 401(k) or health savings accounts, and how do these integrate with the retirement benefits provided by UPS? Additionally, how can employees get the most out of these supplemental plans during their working years at UPS?

Beyond the UPS Pension Plan, employees have additional retirement savings options, such as 401(k) plans and health savings accounts (HSAs). These plans complement the pension benefits and allow employees to further enhance their retirement savings during their working years. UPS offers matching contributions for the 401(k), and employees are encouraged to maximize these plans to ensure robust retirement savings.

How does UPS support employees facing long-term disabilities in relation to their pension plans and health care coverage? Can you explain the interaction between long-term disability benefits and retirement benefits, particularly for employees who may leave the workforce earlier than anticipated due to health issues?

For employees facing long-term disabilities, UPS provides both long-term disability benefits and continued healthcare coverage, which are integrated with their pension plans. Employees who leave the workforce early due to health issues can rely on these benefits to maintain financial stability, as the long-term disability benefits help bridge the gap until they reach retirement age and are eligible for pension payments.

For employees seeking more information on their retirement benefits and options available through UPS, what channels are best for contacting the benefits department? Are there specific representatives dedicated to assisting employees with retirement questions to ensure they understand the nuances of their benefits effectively?

UPS employees seeking more information about their retirement benefits can contact the benefits department through designated channels, such as the employee portal or direct phone lines. UPS also provides representatives who specialize in retirement benefits, ensuring employees receive personalized guidance to understand the nuances of their pension plans and other retirement options effectively.

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

UPS offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan includes a cash balance component, where benefits grow based on years of service and compensation, with interest credits added annually. The 401(k) plan offers company matching contributions and various investment options such as target-date funds and mutual funds. UPS also provides financial planning resources and tools to help employees manage their retirement savings.

UPS offers RSUs that vest over time, giving employees shares upon meeting vesting conditions. Stock options are also provided, allowing employees to purchase shares at a fixed price.