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Overtime, Minimum Wage and Other Payroll Changes for 2020

Posted by Concannon Miller on Tue, Jan 28, 2020

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Overtime, Minimum Wage and Other Payroll Changes for 2020Along with a new year comes new payroll rules. Here are five highlights:

Significant Revisions have been Made to Form W-4

The IRS redesigned Form W-4, beginning with the 2020 tax year. The form was revised to take into account changes from the Tax Cuts and Jobs Act. That law suspended personal exemptions and substantially increased the standard deduction.

The mismatch between the old Form W-4 and the new tax law caused some taxpayers to be over- or under-withheld. For answers from the IRS to frequently asked questions about the new form, click here.

Withholding was Revised

Federal withholding tax computations were also revised to take into account the above changes. For more information, see IRS Publication 15-T.

In addition, some states issued guidance on how to compute withholding in light of the federal changes.

New Overtime Rules were Issued

The Department of Labor finalized overtime rules that went into effect on January 1, 2020. The standard salary level test threshold for a bona fide executive, administrative, or professional (EAP) employee, who are exempt from receiving overtime, has increased from $455 per week to $684 per week ($35,568 annually).

The salary threshold for a highly compensated employee (HCE) to be exempt from receiving overtime has increased from $100,000 to $107,432. The employee must be paid at least $684 per week on a salary or fee basis and perform certain duties.

Employers can now use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.

READ MORE: The New Overtime Rules Employers Must Know

Computer professionals must earn at least $684 per week ($35,568 per year) or at least $27.63 per hour to be exempt from receiving overtime. Ten percent of the salary level ($68 per week) may be satisfied with non-discretionary bonuses or incentive payments.

There's also new guidance on which fringe benefits can be excluded from the regular rate of pay computation. For more information, see our article: "Pay Overtime? The New Pay Rates to Know."

Unemployment Tax may have Changed in Your State

States that have increased the amount of taxable wages subject to unemployment tax (the taxable wage base) in 2020 include: Alaska, Colorado, Hawaii, Idaho, Iowa, Kentucky, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, Utah, Vermont Washington, and Wyoming.

In addition, Arkansas, Illinois, Missouri, and Ohio have lowered their taxable wage base.

The Minimum Wage Rate has Changed in Many States

The following states increased their minimum wage rates on January 1: Alaska, Arizona, Arkansas, California, Colorado, Florida, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, New Jersey, New Mexico, New York, Ohio, South Dakota, Vermont, and Washington.

Some localities have also increased their minimum wage rates.

If you have questions about payroll, or need assistance, contact us or your payroll advisor.

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Topics: Business consulting

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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