Payroll-Related Problems Top 10 Business Concerns for 2023

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Payroll-Related Problems Top 10 Business Concerns for 2023

A list of the most pressing compliance issues that employers will face in 2023.

Businesses in the United States face a slew of regulatory issues, and keeping up with changes can be difficult. We have compiled a list of the most important compliance-related issues that employers will face in 2023, as well as an examination of the legislative and regulatory context surrounding these issues.

This year, funding and tax credit eligibility climbed to the top of the list as business leaders grappled with the economic consequences of inflation and turned to programs such as the Employee Retention Tax Credit and the Inflation Reduction Act. The classification of workers, their pay, and the provision of paid time off for their employees are all things that businesses should be ready for in the event that legislation or regulations are passed.

The following topics have been identified by the company’s compliance professionals as key considerations for employers in 2023:

1. Small Business Financing. Despite the lack of new federal programs to date, businesses can still benefit from funding opportunities left over from the COVID-19 pandemic, such as:

  • The Tax Credit for Employee Retention (ERTC). Businesses have until either April 15, 2024 (for three quarters of 2020) or April 15, 2025 (for all four quarters of 2021) to file amended returns and retroactively claim the credit for paying qualified wages to keep employees working from March 12, 2020, through September 30, 2021 (and for some specific businesses identified as Recovery Startups, wages could have been paid through December 31, 2021).
  • Paycheck Security Program (PPP). Applications for loan forgiveness through the Paycheck Protection Program (PPP) that are submitted before the loan’s maturity date are still being accepted by the Small Business Administration.
  • The Inflation Reduction Act. The maximum amount of the R&D tax credit was doubled by the Inflation Reduction Act, allowing certain businesses to claim up to $500,000 annually for eligible research activities beginning with the 2023 tax year.
  • Incentives from the state. Some states, including 38 approved State Small Business Credit Initiative programs, continue to sponsor programs that enhance funding efforts to assist businesses

2. ​​Equity in Pay.  In 2022, pay equity was once more on the legislative agendas of state and local bodies, and more jurisdictions were anticipated to pass legislation in 2023. By the end of 2022, seven states and several local governments will have passed legislation mandating employer pay transparency. Employers also need to be aware of federal and state initiatives that could become law in 2023 to address pay equity through annual reporting similar to the current California Pay Data reporting and the Illinois Equal Pay reporting intended to reduce racial and gender pay discrimination.

3. Guidance for Worker Classification. The U.S. DOL published a proposal in late 2022 to update the Department’s guidance on identifying individuals as either employees or independent contractors for purposes of the Fair Labor Standards Act (FLSA). The U.S. DOL will publish a final rule in 2023, but it won’t be effective until it’s used to determine whether someone is a worker for the purposes of federal wage and hour law. Employers must continue to exercise diligence in maintaining knowledge of and compliance with the additional challenging tests for figuring out worker status under the numerous other federal, state, local, and sector-specific laws and regulations.

4. Promoting Retirement Savings. There is a good chance that SECURE 2.0 will be released before the end of the year, which will have a significant impact on the retirement space. Building on the framework of the SECURE Act of 2019, SECURE 2.0 includes a number of key provisions, such as expanding eligibility for the tax credit when a business establishes a workplace retirement plan, raising the RMD age, mandating automatic enrollment in certain retirement plans, and even student loan payment matching, which aims to address two crises at once: student loan debt and retirement savings.

5. Regulations on Wage and Hours. In mid-2022, listening sessions were held, and it is anticipated that the U.S. DOL will release proposed revisions to the federal overtime regulations. A higher salary threshold for exempt employees is one of the adjustments that would be made to reflect the labor market as it stands today. Additional rules at the federal, state, and local levels are anticipated in areas like fair scheduling laws, the abolition of sub-minimum wage rates, and the elimination of tip credit in some jurisdictions. After initiatives like the California FAST Recovery Act, which could be subject to voter approval in 2024 and proposes to create a council with the authority to set wage and hour standards for fast food, there may be a rise in industry-specific requirements, particularly in the hospitality, retail, and healthcare sectors.

6. Paid Time Off.  While it doesn’t seem like a federal paid leave program will materialize in 2023, several states across the nation considered legislation in 2022 to give workers paid time off to care for themselves and eligible family members. The District of Columbia, nine other states, and Maryland are the most recent states to pass laws requiring paid family leave. The first opt-in, voluntary paid family leave insurance program will launch in 2023 thanks to legislation passed in New Hampshire. This program will be available to employers as well as to employees directly.

7. Privacy and Cybersecurity. Businesses must adjust their privacy policies and cyber security procedures to effectively balance their needs against both employee and customer expectations regarding the privacy of personal information in light of the expansion and continued norm of a hybrid and remote workforce. Businesses must be up front and honest about how they gather, use, store, and retain data. State data protection laws continue to be expanded despite the lack of a federal privacy law.

Tax amendments, remote and hybrid employment, and healthcare reform are additional topics that businesses should think about.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.

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