As we roll into 2020, it’s time to focus on making it the best year yet for your business. That means staying on top of changing regulations, pivoting with the changing needs of your business and financial goals, and addressing some nagging business decisions that may be long overdue.
1. Heed the New Overtime Rules
The most significant federal changes affecting businesses in 2020 is overtime pay. As of January 1, 2020, businesses under the jurisdiction of the Fair Labor Standards Act (FLSA) should update their pay practices to reflect the following changes:
- The “standard salary level” is rising from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker).
- The total annual compensation level for “highly compensated employees (HCE)” is rising from the currently enforced level of $100,000 to $107,432 per year.
- Employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices.
- Special salary levels for workers in U.S. territories and in the motion picture industry are also revised.
More details and information about the final rule can be found here. Penalties for violating FLSA law can be steep. According to the U.S. Department of Labor, employers who willfully or repeatedly violate overtime pay requirements are subject to civil money penalties for each violation in addition to any back wages due to employees.
2. Classify Employees Correctly
Misclassifying contractors, temporary workers, and other employees can lead to potential litigation, fines, fees, and back taxes. As we pointed out in October, the issue is ever-changing and confusing. Just this past spring, the Texas Workforce Commission (TWC) clarified its stance on “gig workers” hired through digital apps. Its definition is vastly different from how California recently decided to classify them.
Take a moment to review the issue and work with both a CPA and employment attorney to determine whether your employee classification system needs a reboot.
3. Get Your Business Deductions Back on Track
The Tax Cuts and Jobs Act (TCJA) has been in effect for a while now, but there are still areas businesses haven’t quite mastered. Business deductions are indeed one. Be sure to work with your tax advisor to further refine your deduction strategy. You can start with the following common areas:
- The taxability of employee snacks versus meals.
- Moving expense reimbursements, which are now subject to income and employment taxes.
- The changing landscape of deductible mileage, parking expenses, and other travel costs.
- Bonus depreciation versus Section 179 deductions: a revised area that could save you tens of thousands of dollars if handled correctly.
4. Get On Top of Online Sales Tax
If you sell online and don’t have any idea what the “Wayfair ruling” is, give us a call. Last year’s U.S. Supreme Court case involving online retailer Wayfair transformed what sales taxes even small online retailers are required to collect. Look at our blog post from earlier this year for a refresher.
As of October 1, Texas businesses selling items or services to purchasers in other states should collect taxes for those states, according to the Texas Comptroller of Public Accounts. Also, the 86th Legislature adopted HB 1525, which creates new tax responsibilities for marketplace providers and marketplace sellers, and HB 2153, which provides a single local tax rate for remote sellers. The Comptroller has stated that it will also update its franchise tax rules because of the Wayfair decision “in the near future.”
5. Get Your Exit Plan in Order
We’ve said it before: It takes at least ten years of solid planning to exit a business on top. Business owners who skip exit planning can lose to the IRS more than half of the total amount paid for the sale.
Make this the year you take exit planning seriously. You can start now by reviewing our following featured articles for local publications Shavano Living and Building Savvy magazines:
- Exit Planning and Your Taxes: Including considerations like your business structure, capital gains versus ordinary income, personal goodwill, and accelerated depreciation.
- Retiring and Your Taxes: Additional considerations that are more on the personal level, such as downsizing your home and factoring in potential medical expenses as you age.
- Passing Down Your Family Business: Specific tax, legal, and financial considerations if you’d like to pass your business down to the next generation in your family.
You can make 2020 the best year yet for your business, but it’s time to get to work on it if that’s your goal.
Ask us how we can help with the areas above and so much more.
Image by Markéta Machová from Pixabay