To paraphrase Bob Dylan, the rules are a-changin’ and businesses should prepare for new government rules and regulations. Here are some things to look for and determine whether they impact your business. Be sure to implement the changes as necessary.
Federal law changes impacting businesses, and employers in particular, may be governed by the IRS, the Department of Labor, or some other government department or agency.
A slew of cost-of-living adjustments change the numbers for many tax rules.
- Changes in first-year expensing, QBI taxable income limits, as well as tax rates on owners of pass-through entities and more.
- Changes contribution and benefit limits for qualified retirement plans
- Changes for high-deductible health plans and health savings accounts (HSAs)
New medical reimbursement arrangements—Individual Coverage HRAs and Expected Benefit HRAs —become effective at the start of the new year.
Starting in the new year, there’s a new Form W-4 for employees to claim wage withholding. While an existing employee is not required to file a new form, it’s probably a good idea to do so in order to have more accurate wage withholding.
In addition, note that the work opportunity tax credit and the credit for paid family and medical leave expired at the end of 2019, although they could be extended retroactively to January 1, 2020.
Due to a final government rule, new salary levels will be used to determine whether or not a worker is subject to overtime pay rules starting January 1, 2020.
State and local changes
A number of states continually change their tax rules—to raise revenue or to cut the tax burden on businesses and resident. There are also numerous changes impacting employees in certain locations.
Check for changes in tax rates for income taxes, sales taxes, and other taxes you pay on the state level. For example, Illinois is phasing out the corporate franchise tax starting in 2020.
Some states are using economic nexus to impose income taxes on companies that do a certain amount of business within the state even though they aren’t physically within it.
- Hawaii state income tax applies if gross income or gross proceeds from the sale of tangible personal property delivered within the state or intangible property used in the state is $100,000 or more, or if there are 200 or more separate transactions within the state.
- Texas’s franchise tax applies if a company has gross receipts of $500,000 or more from business done in the state.
Other states could follow suit, so stay alert (two cities—Portland, OR and San Francisco, CA—already use economic nexus for this purpose).
Minimum wage rates
A number of states and some localities have higher hourly rates starting January 1. Some changes are the result of cost-of-living adjustments; other due to legislation. As long as the state or local rate is higher than the federal rate ($7.25/hour), the higher rate applies.
Be sure your workplace posters reflect the 2020 rates. As an employer, you are required to display these posters or face a penalty.
There are numerous new workplace rules that go into effect. Some examples:
- California prohibits discrimination based on hair texture and hairstyle and expands lactation accommodations.
- Colorado makes it a felony to refuse to pay wages due to an employee who commits wage theft.
- Illinois imposes mandatory anti-sexual harassment training.
- New York requires employment contracts that include a nondisclosure agreement to include a specific carve out to allow employees to speak with law enforcement. And New York City bars inquiries into salary history, effective January 6, 2020.
The Greek philosopher Heraclitus said: “There is nothing permanent except change.”