Effective January 1, 2020, the Department of Labor updated the thresholds for workers to be considered exempt from overtime.
Changes were also made to Form W-4, the Michigan minimum wage and the business mileage rate. Following is a summary of some of the changes employers should be aware of.
Updates to overtime exemption: The standard salary level necessary to exempt executive, administrative, or professional (EAP) employee from receiving overtime has increased from $455 per week to $684 per week ($35,568 annually). The salary level for a highly compensated employee (HCE) to be exempt from receiving overtime has increased from $100,000 to $107,432. The employee must be paid at least $684 per week on a salary or fee basis and perform certain duties.
Employees who do not meet the minimum salary requirements must be paid overtime for every hour worked over 40 per work week.
Employers may now use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
Computer professionals must earn at least $684 per week ($35,568 per year) or at least $27.63 per hour to be exempt from receiving overtime. 10% of the salary level ($68 per week) may be satisfied with non-discretionary bonuses or incentive payments.
Click here for more information on qualifying a worker as exempt and special salary levels for U.S. Territories and the motion picture industry.
Major revisions to Form W-4. The IRS completely redesigned Form W-4, beginning with the 2020 tax year. The form was redesigned to take into account changes in the Tax Cuts and Jobs Act (TCJA, 12/22/17), which suspended personal exemptions and substantially increased the standard deduction (see new 2020 Form W-4). The mismatch between the old Form W-4 and the new tax law caused some taxpayers to be over-withheld or under-withheld.
USCIS Form I-9 Update. A new version of the Form I-9 (version 10/21/2019), Employment Eligibility Verification, is effective as of January 31, 2020. Employers should use this version for all new hires. Visit uscis.gov/i-9 for copies in multiple formats and for additional information.
MI-W4 (Rev 11-19) is the current Michigan Withholding exemption certificate.
Minimum wage rate. Minimum wage in Michigan increased to $9.65 per hour beginning January 1, 2020. Tipped workers hourly wage increased to $3.67 per hour.
Business Mileage Rate Decreasing in 2020. The standard mileage rate for the use of a car (also vans, pickups, or panel trucks), driven for business use has decreased from 58 cents per mile to 57.5 cents per mile in 2020.
If you questions about how these changes could affect your business, please feel free to contact one of our CPAs at (616) 642-9467 or request a complimentary accounting consultation.
By: Beth Thomas