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Important 2019 Year-End Tasks: HR and Payroll, Including New Form W-4

by Lisa Calick and Laura Melville

The end of the year marks an ideal time for employers to take inventory and prepare for the transition to the New Year.

As 2019 comes to an end, we put together this checklist to help make sure you are prepared and suggest taking the following action steps:

  • Have your employees review their personal information, including name, address and social security number, and make any updates before Form W-2s are prepared;
  • Review your records and determine if there is any third-party sick pay or any other adjustment to report on the Form W-2s;
  • If your business is an S Corporation, remember that employer-paid health insurance premiums should be reported on each greater than 2-percent shareholder-employee’s Form W-2;
  • Review your vacation, sick and PTO time accruals, particularly for any amounts that will be paid out at the end of the year;
  • If you have independent contractors for whom you issue a Form 1099, make sure you have all the correct contact information, and ensure that each independent contractor has provided you with a Form W-9.

Not only is it important to prepare for the close of 2019, it is equally important to be ready for 2020!

Prepare now for the first payroll of the New Year:

  • Be aware of any changes to the state minimum wage. Both New Jersey and New York will see an increase in the minimum wage as of the beginning of the year.  Make sure that your payroll records reflect such increases;
  • Make sure that your workers are properly classified. Effective January 1, the minimum salary required to qualify for certain overtime exemptions per the Fair Standards Labor Act will increase to $684 per week ($35,568 per year);
    • If you have employees who are currently considered exempt yet fall below this threshold, you should consider either raising their salary or reclassifying them to nonexempt status
    • Important: Certain states, such as New York, may have higher salary thresholds in which case you are subject to the higher amount

You should also note the following payroll changes for the coming year:

  • The Social Security wage base will increase to $ 137,700 in 2020; 6.2% of that wage base is a maximum contribution by each employee of $ 8,537.40;
  • Medicare tax of 1.45 % will remain unchanged;
  • An additional 0.9% Medicare tax applies to individuals with annual earned income of more than $200,00, and $250,000 for married couples filing jointly.

New Form W-4

A major change for the New Year relates to the Form W-4, which has now been issued by the IRS, reflecting changes from the Tax Cuts and Jobs Act.  The new form has been significantly revised from the current version that we have known, so it is important that employers start to familiarize themselves with this version:  https://www.irs.gov/pub/irs-pdf/fw4.pdf

Rather than using allowances, your employee’s withholding will be determined through a multi-step process that may take more time.   This change may also impact how you enter this information into your payroll software beginning in January.

Thankfully the new form only needs to be completed by employees who are hired on or after January 1, 2020, in addition to any current employee wishing to make a change to their withholdings.  You’ll want o make sure you and your Company are prepared to receive questions from employees about the new form.

For further guidance as it relates to these items, you may reach out to our HR and Payroll team.

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