With every change in the executive branch, so comes regulatory change. Presidents get to appoint their people to head the alphabet soup of regulatory bodies, and with each person appointed comes a vision and plan for how this department operates.
In the past few months, we’ve looked at some of the goings on in the Biden administration—as well as their lofty goals during the two years of complete legislative control. From the potential impact of the new SEC Chief to the immense pressure on companies to submit environmental, social, and governance disclosures to changes coming to taxation, the Administration has some big plans in the coming years.
But this begs the question, what’s happening now? Taxes, stimulus, leave, remote work, and worker classification, according to a recent Accounting Today article.
Something we discussed in an article written during the Presidential transition, the Biden Administration had some big plans for changes. Though highlighting the long-term initiatives including global book income, removal of the S-Corp income deduction on small businesses, and green-focused taxes, Accounting Today sees 2021 bringing the following:
“A potential increase in IRS enforcement is expected, [and] it is also possible there will be some legislative action on tax policy. […] States may increase tax enforcement as well as introduce or increase taxes to balance COVID-impacted budgets. Additionally, depletion of state trust funds from recent high unemployment levels could result in increased tax rates and potential surcharges for employers if states attempt to replenish funds without additional federal stimulus funds.”
One of the more significant changes written after the Accounting Today article was the increased reporting required from companies who work with “third-party” gig workers, who will be required to report more transactions to the IRS. This was done by dramatically reducing the 1099 reporting threshold to $600.
Gig workers who took occasional jobs will suffer the most, as the threshold drops from $20,000 and 200 transactions to just $600 with no transaction minimum.
Impact of Stimulus Laws
Following the third round of stimulus bills, we’re now left asking what’s going to happen next? The first and second rounds put a lot of focus on small businesses, while the third was focused on individuals, government, and legislative initiatives. Business and finance leaders need to prepare for the ongoing changes, whether they’re PPP-related or employee management-related.
Looking at the second round, Accounting Today noted that decision makers should look at the following in 2021:
- Families First Coronavirus Response Act (FFRCA) Tax Credits: Offers credits to employers, though they are no longer required to offer the leave in 2021.
- An Extension and Expansion of the Employee Retention Credit: Increases the amount of the credit available in 2021 and allows employers that receive a PPP loan to retroactively qualify as long as the credit isn’t used on the same wages forgiven under the PPP.
- Collection of Deferred Social Security Withholdings: For those employers who deferred Social Security withholding, the bill may come due soon. Additionally, employers may need to put more reporting in for this.
Family Leave, Sick Leave, and COVID Leave
Something that was touched on in the third round of stimulus, additional leave will be a priority in 2021. Already included in the first round and made optional in the second, the third stimulus encourages small businesses to offer it and provides tax credits for employers with fewer than 500 workers to reimburse them for paid leave costs of up to $1,400 per week per worker.
Still, it’s likely that the next year might provide even more regulation and legislation designed to encourage or mandate leave. Accounting Today notes,
“Certain state and local leave laws may be extended as the pandemic continues. There is also bipartisan interest in a permanent federal paid family leave law, with several proposals expected in the coming year. In addition, many state and local jurisdictions enacted or are contemplating paid leave laws.”
The New Face of Work
With a variety of questions created by the push to remote work, many employers, regulators, and legislators are looking at the impact of making these policies a bit more permanent. First and foremost, the main thing to look at is the location of workers. Many states turned a blind eye to this in 2020, but with arrangements becoming permanent, this could change.
“As employers consider integrating work-from-home policies on a more permanent basis, they must examine any compliance challenges to these arrangements. […] While some states gave a reprieve from businesses establishing tax authority based on the employee’s home location as a result of the pandemic, that relief was not necessarily permanent.
Employers should also consider any wage/hour issues for non-exempt employees and how they will track hours. Workers’ compensation obligations still apply for remote workers, but rules can be complex.”
A constant initiative from any Democrat-appointed DOL chief, worker classification once again finds itself in the spotlight. Earlier this year, the DOL finalized a rule to make it easier to classify workers as independent contractors. It’s unlikely that the rule stays. Accounting Today notes,
“Enforcing agencies, the courts and legislatures at the federal, state and local level are expected to continue to address this complex issue in response to worker challenges in many industries. […] [T]ests for worker classification enforced by other agencies […] will continue to apply, and others are likely to be introduced in 2021. Penalties for worker misclassification continue to have a significant financial impact on employers of all sizes.”
Continued Changes in the Business World
As we all look forward to whichever normal is on the horizon, those in leadership positions still need to ensure everything from 2020 was in the clear. With more changes on the horizon, you’re going to want to keep up to date with all of the latest news and analysis. Planning your jump forward will require a unique approach to employee management, finances, and more, and we’re proud to help our members to get more out of their days, months, quarters, and years. Get to know more about us, join our Slack Channel, and get to know all about the benefits of joining here.