Are you one of the 30 million small business owners in the United States? If so, then you know how important it is to follow the law when it comes to paying your employees.
The last thing you want is to face potentially business ending fees because you failed to follow a policy. Because of this, you need to stay up on all of the new payroll laws.
Here are four payroll law changes that you need to know about for your 2019 taxes.
1. Withholding Forms
While the W2 form that employees use remains unchanged from the previous year, the total allowance allowed has changed. In 2018 the withholding amount allowed was $4,100. In 2019 this maximum increases to $4,200.
Your employees won’t need to fill out a new form. The only reason they would is to change their withholding amount or claim exemption from withholding.
Keep an eye out in the future. The IRS has announced that they will release a new version of this form for 2020. Be sure to ask your payroll and HR service about this new form.
2. Medicare and Social Security Taxes
The tax rates for both Social Security and Medicare remain unchanged from 2019. However, the wage base for the Social Security part has changed.
In 2018 this amount was $128,400. For 2019 this total is increased to $132,900.
Since this wage limit increased, so will the maximum amount of Social Security portion that is paid by both the employee and employer. The new total is $8,239.80. To figure this out multiply $132,900 by 6.2%.
There is no maximum for the total paid on the Medicare portion. The tax rate for this portion is 1.45%.
3. Reimbursing Employees
Do you reimburse your employees for using their personal car for business travel? What about other travel reimbursements?
If so, then you need to know the IRS approved reimbursement rate so that your employees are not liable for reporting additional income. The IRS states that the standard mileage reimbursement rate is 58 cents per mile. This is up from the 35 cents in 2018.
4. Fringe Benefits
There are some specific new rules for fringe benefits. If any of these apply to your business, be sure to account for them for the 2019 year.
HSAs: Health Savings Accounts
If you offer a high deductible health plan, then you can contribute to your employee’s health savings accounts. This is a tax-free benefit, but the amount is capped.
For 2019 it can be up to $3,500 for individuals and $7,000 for families.
This benefit has increased from the 2018 year. It was once $13,840. For 2019 it is $14,080. The exemption from income tax withholding remains in place, while it is still subject to FICA and FUCA taxes.
As the employer, you can’t deduct the benefits you pay out for transportation. But you can deduct certain portions of other fringe benefits such as parking spaces.
You employees can receive this benefit tax-free for up to $265 per month. That is $5 more a month than in 2018.
Qualified Small Employer Health Reimbursement Arrangements
As long as there isn’t an employer mandate in effect, you can reimburse your employees for the health insurance they get on their own. The cap for 2019 is $5,150 for individuals and $10,450 for families.
Pay Attention to New Payroll Laws
Be sure to implement these new rules for 2019 as you review your benefits offerings for the coming year.
If tracking new payroll laws sounds overwhelming, you could hire an outside team to manage this task. They will ensure your business is always in compliance.
Schedule a consultation today and learn how we can help you with your bookkeeping and finance needs.