Small Businesses Should Stay on Top of Changes in Regs
ROCHESTER, N.Y. -- Paychex Inc. has issued a list of top regulatory changes likely to affect America's small businesses this year and that owners should stay abreast of. The list was created based on Paychex’ assessment of likely changes in the law or bureaucreatic fiat.
Tax gap: The IRS continues to aggressively look at ways to close the $450 billion gap between taxes it expects to collect and taxes owed. Most of that gapis the result of filers understating their income and overstating deductions to which they’re entitled. IRS examiners focus their enforcement resources in areas thought to have the highest degree of noncompliance -- affluent individuals and small-businesses owners -- and are making greater use of technology to identify audit targets.
Health care reform: After last year’s Supreme Court ruling and the presidential election, health care reform remains essentially intact. This year, Medical Loss Ratio standards will continue, meaning that insurance carriers that don't spend the prescribed percentage of premium dollars they collect on actual medical care will be required to provide rebates to policyholders. Large employers (those who filed 250 or more Form W-2s in the prior tax year) will be required to report the cost of employer-sponsored health coverage on their employees’ 2013 W-2s. New this year is the $2,500 limit on an employee’s contribution to a medical flexible spending account (FSA) as well as the employer’s obligations to withhold and report relative to the additional Medicare tax.
Worker misclassification: Paychex anticipates the IRS and U.S. Department of Labor will step up their enforcement regarding the misclassification of workers as independent contractors. Pending legislation at the state and federal levels, as well as executive orders at the state level establishing dedicated task forces to look at this issue, continued throughout 2012.
National and regional enforcement efforts/initiatives specific to industries in lower wage sectors, such as hospitality and construction, are also anticipated. These include:
Retirement savings: Employers should be aware of several developments in this arena. The limits for contributions to retirement plans such as 401(k)s will increase in 2013. Legislation may also be introduced to manage the effects of 401(k) “leakage” that results when employees draw down retirement savings by taking loans and withdrawals from their plans. Separately, federal policymakers, as well as those in some key states, may consider legislation to address the growing view that many workers are not saving enough for retirement. This could include a mandate that certain employers that do not sponsor a retirement plan for their employees withhold a modest amount of a worker’s pay for deposit into a basic, automatically enrolled retirement investment.
National Labor Relations Board: In the wake of President Obama’s re-election, this agency is expected to continue its pro-labor focus. While broad legislation that favors unions is unlikely to pass in the next Congress, the NLRB is expected to seek to adopt rules to expedite elections where unions seeks to represent workforces and/or further help unions in their efforts to organize. To this end, the board is likely to continue to give scrutiny to employer protocols even at nonunion companies, including social media policies, employment-at-will disclaimers, and harassment investigation procedures.
Department of Labor agenda: The DOL Wage and Hour Division is expected to pursue an active regulatory agenda with the anticipated release of final regulations for the expanded military family leave under the U.S. Family and Medical Leave Act, and a final rule to substantially restrict current minimum wage and overtime exemptions for companionship services and live-in domestics. Labor also may revive the process for “Right to Know” regulations that could require employers to provide written notification of a worker’s status and to deliver required wage statements. The agency also is expected to continue its assertive wage and hour enforcement program, especially in the hospitality industry and others where many employees have tips as part of their compensation.
Immigration: Immigration reform is expected to be a top focus in the president’s second term, including efforts by Congress to pass legislation to pre-empt recent state and local laws. The trend of increased enforcement in the area of Form I-9 audits is likely to continue after a record number of worksite inspections in 2012. The release of a revised Form I-9 is expected in early 2013. The pilot program for E-Verify, the federal government’s Internet-based employment verification tool, was extended for another three years in late 2012. While its use remains voluntary in most of the country, some states have made it mandatory for some or all employers, and other employers may be required to use E-Verify under federal regulations.
Consumer Financial Protection Bureau: With Obama’s re-election, the Consumer Financial Protection Bureau is likely to play an even more prominent role in overseeing banks and credit unions as well as “nonbank financial institutions” such as mortgage companies, payday lenders, and debt collectors. As these expanded activities evolve, small businesses could see direct or indirect effects on how they interact with their customers and employees, as well as potential changes in their relationships with banks and lenders.
Cyber fraud: The steady increase in cyber fraud, especially against small businesses that may lack the resources to implement sophisticated security methods, likely will continue to be front of mind this year. Federal anti-cyber fraud legislation is a distinct possibility to better protect the nation’s critical infrastructure against hackers and other criminals. Many states also are likely to further expand or strengthen regulations requiring businesses to employ adequate security over confidential personal and medical information.
Business continuity: Hurricane Sandy reinforced the importance of a sound business recovery and continuity program. Even small businesses should ensure their key vendors have adequate processes to maintain uninterrupted service should extreme weather or other unforeseen circumstances occur, and maintain their crucial documents at an alternative location for protection and adherence to retention guidelines for materials such as tax returns, business filings, and other financial documents.
FDIC Insurance: Without Congressional action, the current unlimited Federal Deposit Insurance Corp coverage for noninterest-bearing checking accounts will expire in 2013, reverting back to $250,000 per account. The discontinuation of this unlimited federal insurance, enacted as part of the original Dodd-Frank legislation, has led many small businesses -- which often use smaller, community banks -- to consider shifting their operating funds to the perceived greater safety of larger banks or spreading balances out among more than one institution, keeping deposits under the $250,000 cap in each.
SOURCE: Paychex Inc.
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