Payroll can be extraordinarily complex and costly if not done correctly, especially if mistakes or inaccuracies leave your business vulnerable to litigation. Make sure you are following current laws and regulations to ensure compliance in the event your company is audited or subjected to a lawsuit. Here are 10 changes that may apply to your business in 2019.
1. New minimum wage laws
While the federal minimum wage rate ($7.25 per hour) has not changed for 2019, state and local rates in your area may have changed. Nineteen states across the U.S. have increased their minimum wage rates for workers. Contact your local state employment department for more information regarding your state minimum wage.
2. New labor law posters
Employers of all sizes are required to post current labor law posters that reflect the new minimum wages, whether or not any of your employees receive the minimum wage. In addition, businesses operating in specific cities have additional city minimum wage updates, and are also required to post current city labor law posters to reflect minimum wage changes. Check with the Department of Labor (DOL), U.S. Occupational Safety and Health Administration (OHSA) and your state labor department for free posters. You can also order the posters from Amazon, Staples, etc.
3. New Social Security wage base limit
Social security taxes, which are a part of FICA, apply to taxable income up to a set limit. The employer and employee each pay 6.2 percent of Social Security tax up to the wage base limit. That limit has increased to $132,000 for 2019.
4. Employee retirement elective deferrals
The amount that employees can elect to deduct from their wages for qualified retirement plans (i.e. 401(k) or SIMPLE IRA) have increased for 2019 over 2018 amounts.
5. New Flexible Spending Account limits
The amount that an employee can elect to commit to a Medical Flexible Spending Account in 2019 has increased to $2,700, up from $2,650 in 2018. Note: the limit for dependent care FSAs is fixed at $5,000 per year and is not adjusted annually for inflation.
6. Medical coverage options
Under the Affordable Care Act, employers with 50 or more full-time and full-time equivalent employees are still under the employer mandate. Small employers can still choose to provide coverage and should note changes for 2019:
- Health savings account limits have increased
- Qualified small employer health reimbursement arrangements (QSEHRAs) have increased contribution amounts.
7. New employee transportation benefit amount
If you provide transportation benefits to your employees – such as free parking, transit passes or van pooling, the amount that can be received tax free is $270 per month – up from $265 in 2018.) However, employers cannot deduct this benefit. Guidance from the IRS is available to help employers understand how to figure the nondeductible portion of their lease payments if they offer free parking to employees.
8. State Unemployment Tax changes
Some states have made changes in 2019 to the unemployment tax rate. Changes may result from law changes (i.e. Oregon and Washington increased state base amounts) or your claims experience.
9. Workers’ compensation rates
Your premium rate may have changed for 2019. Check with your state to determine what you need to pay and for whom. For example, S Corporation owners may be able to opt out of coverage.
10. New employment laws
There may be new employment law rules for 2019 that are not listed above. For example, an Oregon Equal Pay Law, effective January 1, 2019, prohibits employers from paying employees different amounts for the same or comparable work. In California, a new law requires employers with 5 or more employees to provide at least 2 hours of sexual harassment training to all supervisors (and 1 hour to non-supervisors) by the end of 2019, and once ever 2 years following.
Keeping up with changes to payroll rules and regulations can be a daunting task. Work with your CPA and state employment department to ensure you are in compliance with new regulations. Consult with an employment law attorney if you have any questions about federal, state or local law changes.
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