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Updates from U.S. Department of Labor & IRS

Posted By Justin Ruen, Wednesday, December 18, 2019

New Rules from U.S. Department of Labor

The U.S. Department of Labor recently finalized its new rule under the Fair Labor Standards Act (FLSA) which determines whether an employee qualifies as exempt from overtime pay. All employees covered by FLSA who are not exempt must be paid time and one-half their regular pay rate for all hours worked over forty in a workweek. In order to be exempt, employees must be paid at least the "standard salary level" and pass the duties test. The new rule increases the salary threshold from $23,660 annually ($455 per week) to $35,568 annually ($684 per week). Employers may use certain nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary level. This applies to all employees who fall under the executive, administrative and professional categories. The duties tests to determine whether or not an employee should be included in one of these categories have not changed. In addition, in order to be exempt as “highly compensated,” employees must earn $107,432 annually (previously $100,000).

The U.S. Department of Labor also finalized a rule defining what perks and benefits employers should exclude when determining the regular rate of pay for employees covered by FLSA. Examples include parking benefits, wellness programs, certain tuition benefits, payments for unused paid leave, business expense reimbursement for items such as cellphone plans, the cost of office coffee & snacks, and discretionary bonuses.

The new rules go into effect January 1, 2020.

New IRS W-4 Form

The IRS has revised the W-4 form to reflect tax code changes from the Tax Cuts and Jobs Act. The 2020 Form W-4 no longer includes withholding allowances which were tied to personal exemptions because they are no longer in use.

The new form is required to be used by all employees hired on or after January 1, 2020. Current employees are not required to complete the new form, but will need to use it if they make any adjustments after January 1, 2020.

A new Publication 15-T, Federal Income Tax Withholding Methods, is scheduled to be released soon for use with the 2020 Form W-4. It will include steps to determine withholding under the Percentage and Wage Bracket Methods using both the 2020 Form W-4 and prior years’ versions. More information can be found here.

 

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