Federal Law Update
Reminder—New Minimum Salary for Exempt Employees
Starting January 1, 2020, most employees who are classified as exempt under the executive, administrative, professional, and computer employee exemptions will need to be paid at least $684 per week or $35,568 per year.
Minimum Wage Increase for Federal Contractors
On January 1, 2020, the minimum wage for employees doing work on or in connection with federal contracts will increase to $10.80 per hour. The minimum wage for covered tipped employees will increase to $7.55 per hour.
In the new year, employers will need to provide the redesigned Form W-4 to new employees and current employees who want to change their withholdings. Employees who have submitted Form W-4 in any year before 2020 are not required to submit a new form merely because of the redesign. Employers should continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.
Two of the biggest changes to the form are the elimination of allowances, which have been replaced by dollar values to calculate withholding, and the addition of boxes to indicate if workers hold multiple jobs or are in two-earner households.
The new form is divided into five steps. Employees will provide information for the steps that apply to them (steps 2-4 may not).
Step 1: Enter personal information (including marital status).
Step 2: Account for multiple jobs. This step is completed if the employee holds more than one job at a time or is married filing jointly and their spouse also works. The correct amount of withholding depends on income earned from all jobs.
Steps 3 and 4: Claim dependents and other adjustments (specifically, other income that is not from jobs, deductions, and extra withholding). Steps 3 and 4 are completed on Form W-4 for only one job, and these steps are left blank for the other jobs. Withholding is most accurate if an employee completes Steps 3 through 4(b) on the Form W-4 for the highest paying job.
Step 5: Employee signature and date.
Publication 15-T (still in draft form) assists employers in determining the amount of federal income tax to withhold from their employees’ wages.
Read about the Form W-4, browse the FAQs, see the 2020 version, and read about Publication 15-T.
We recommend that employers do not provide tax advice to employees, but instead direct them to the IRS’ Tax Withholding Estimator or their tax professional for guidance on completing the W-4.
Reminder: If your state has its own W-4, continue to offer the most current version to employees for voluntary completion to ensure accurate state tax withholding.