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Top 3 Changes for Payroll in 2020 - BenefitMall

With the start of each new year come changes in how we pay taxes. Some years, the changes affect employer payroll departments. 2020 is one of those years. There are numerous changes at both the federal and state levels that companies should be aware of. This post highlights the top three. Visit: https://employers.benefitmall.com/Payroll-HR-Essentials<br><br>

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Top 3 Changes for Payroll in 2020 - BenefitMall

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  1. Top 3 Changes for Payroll in 2020 With the start of each new year come changes in how we pay taxes. Some years, the changes affect employer payroll departments. 2020 is one of those years. There are numerous changes at both the federal and state levels that companies should be aware of. This post highlights the top three. If compliance with ever-changing rules and regulations is proving too much for your payroll or HR department, we invite you to consider outsourcing your payroll and benefits administration to us. As a nationwide service provider with years of experience, we can take on all your payroll responsibilities so that you can devote your time to other things. Note that we have specialized payroll solutions for the restaurant and construction industries. With that said, let us get to those payroll changes, so without further ado: 1. Changes in FICA Withholding Some taxpayers will be paying more in FICA taxes in 2020, though there is no direct change in the rate. FICA is a combination of Social Security and Medicare taxes paid through a combination of payroll deductions and employer contributions. Self-employed individuals do not pay FICA per se; they pay an equivalent self-employment tax. The FICA rate remains the same in 2020. Social Security is charged at a total of 12.4% while Medicare is 2.9%. Both employer and employee split them down the middle. The biggest change for employers this year is an increase in the amount of income subject to FICA. The 2019 maximum of $132,900 increases to $137,700 for 2020. That is an increase of $4,800. Only those who earn amounts between the old and new limits will see an increase in their taxes.

  2. 2. New Overtime Rules The U.S. Department of Labor has finalized their rule governing exemptions to overtime pay. It is effective January 1, 2020. Under the new rule, the standard salary level for exempt employees increases from $455 per week to $684 per week – or $35,568 annually. Employers will be allowed to include non-discretionary bonuses and incentive pay to account for up to 10% of this total. Annual pay requirements for highly compensated employees increases from $100,000 to $170,432. The IRS defines a highly compensated employee as someone who owns more than 5% interest in the business at any time during the current or previous year. If ownership covers the preceding year, the individual's compensation must exceed $130,000. 3. New W-4 Becomes Mandatory As a result of the Tax Cuts and Jobs Act 2017, the IRS revised Form W-4 this year. The new form becomes the official form as of January 1, 2020. That means any and all new employees must fill out the new form during the onboarding process. Current employees hired before January 1 are not required to fill out a new form unless they so desire. The new W-4 eliminates the entry for personal exemptions. In exchange, it allows employees to enter additional amounts of income that will not show up on the W-2 in order to have more withheld. Concerned employees can always visit the IRS website and use the site’s free tool for calculating how much should be withheld. As for withholding, employers are to use the same withholding tables. That does not change with the new W-4. Employers are not allowed to require employees hired prior to January 1 to fill out a new W-4 if an older form has already been filled out and submitted. And there you have the top three payroll changes coming for 2020. Again, do not hesitate to reach out to BenefitMall if you are finding that in-house payroll is overwhelming your staff.

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