Compliance Updates (Government Liaison Reports)

One Big Beautiful Bill Act guidance:

• Notice 2025-62 - Employers & payors will not face penalties for failing to provide a separate accounting of any amounts for qualified tips or qualified overtime compensation in 2025.  Employers are still encouraged to make their best effort using: an online portal, additional written statement or box 14 of the W-2. 

FUTA Credit Reduction: California & the U.S. Virgin Islands

• California receives a reduction of 1.2% in credit & the U.S. Virgin Islands receives a reduction of 4.5% in credit.  Additional payments for amounts owed are due January 31, 2026

• General contribution limit increases to $24,500, standard catch-up increases to $8,000, "super" catch-up remains at $11,250 (ages 60-63) and the annual compensation limit increases to $360,000.  The notice also increased the prior year wage threshold for employees required to make 2026 catch-up contributions as Roth
  • Will be $150,000 in FICA wages in 2025 for the employer sponsoring the plan

States with Paid Family & Medical Leave Taxes - 2026 Rate Changes:

• Colorado total rate decreases to 0.88%
• Washington total rate increases to 1.13%
• NOTE: Minnesota Paid Family and Medical Leave contributions begin 1/1/2026 at a rate of 0.88% up to the social security wage limit rounded to the nearest $1,000 (For 2026 - $185,000)

One Big Beautiful Bill Act passes, highlights include:

• Permanent extension of the Tac Cuts and Job Act (TCJA) provisions, increased SALT deduction on federal personal income tax returns, tipped wage & overtime deductions on personal returns, new tax-advantaged savings accounts for children & changes to HSA requirements
• IRS FS-2025-03 further clarified both tipped wage and overtime premium exemptions will be available to itemizing & non-itemizing tax payers.  There will be reporting requirements with more guidance to come but there will be transition relief for tax year 2025

The DOL issued field assistance bulletin 1 to assist with FLSA worker classification (no longer using the 2025 worker classification analysis considering 6 factors in totality)

Beneficial Ownership Information reporting requirement reinstated; deadline extended to March 21, 2025

IRS released Revenue Ruling 2025-04 to provide guidance surrounding federal tax treatment of contributions and benefits paid in various situations for state paid family and medical leave (PFML) programs

• Mandatory employee contributions are considered state income tax and can be deducted by individuals who itemize
• Mandatory employer contributions are considered excise taxes and can be deducted as an employer expense on business returns
• Voluntary employer coverage of EE contributions is taxable income (similar to employer coverage of FICA taxes)

States that will receive a FUTA credit reduction in 2024: California (0.9%), New York (0.9%) & the US Virgin Islands (4.2%); see the DOL FUTA Reduction  for more information

Secure 2.0 Long-Term Part-Time changes extended to not become required until plans affective January 1, 2026

Three municipalities approve local income tax increases through ballot measures: Clayton (2026), Coldwater (1/1/2025) and Mingo Junction (1/1/2025)

REMINDER DOL Final Overtime Rule effective 7/1/24 white collar exempt wage threshold increasing from $684/week to
$844/week. Additional increase to $1,128/week eff. 7/1/25
Legal challenges continue, currently on hold for Texas state employees

Supreme Court overturns Chevron rule that previously allowed federal agencies to interpret ambiguous laws; agency rules will be more subject to court challenges & employers will need to follow court rulings as they develop

Updated withholding formula, top tier rate decrease effective 7/1/24

Bellefontaine increase to 1.6% 7/1, NEW RITA taxes eff. 7/1 Blanchester (1%), College Corner (1%), Glenmont (1%), Holmesville (1%)

Bourbon County increase to 1.25%, Flemingsburg increase to 1.5%, Grant County increase to 2.5% & Warsaw increase to 1.75% all eff. 7/1

The National Labor Relations Board’s (NLRB) joint employer rule faces continued legal challenge as the Senate approved a measure to block the regulation. President Biden is expected to veto the Senate resolution.

The joint employer rule changes when two companies share union obligations & liability for labor violations

The EEOC to open 2023 EEO-1 Data Collection 4/30/24

California Pay Data Reports Due May 8 2024 (https://calcivilrights.ca.gov/paydatareporting/ )

California FAST Act increased minimum wage for quick service industry effective 4/1/24 ($20 per hour); exceptions were passed for quick service within theme parks, hotels, airports & stadiums

Virginia withholding formula updated effective 4/1/2024 with an increased standard deduction amount

Virginia governor vetoes bills for paid family & medical leave & pay transparency mandates

DOL Issued final rules on worker classification including a new FAQ section; final rule is eff March 11

Reminder: IRS lowered the threshold for electronic filing to 10 forms in 2024

Three States & US Virgin Islands face 2024 FUTA Credit Reduction

California, Connecticut & New York

Most defaulted student loan garnishments remain canceled through Sept 2024

Effective 1/1/2024, individuals under 18 are exempt from Ohio Municipal taxes 

Does not include School District taxes