A key way CPAs create value for clients is by anticipating the ways they will need to adjust to evolving IRS regulations. But what about keeping track of changes to regulations around payroll specifically? Maintaining payroll compliance is essential to abiding by tax regulations.
So, what do you need to know about payroll for 2023 and how changes might affect your clients? Here’s a quick overview of what’s new and some ways that you can assist your clients with payroll compliance best practices this year.
What’s New for Payroll in 2023
The good news is that no dramatic, sweeping changes are anticipated around payroll regulations in 2023, but some updates will affect payroll for many clients.
The Social Security wage base is rising to $160,200 in 2023, an increase of $13,200 from 2022. With the Social Security portion of FICA taxes unchanged at 6.2%, employers will pay $9,932.40 in Social Security taxes on each employee who earns more than the wage base in 2023, an increase of $818.40 over 2022. This marks a significant increase over recent years. Between 2021 and 2022, for example, the wage base rose by just $4,200.
New paid family and medical leave programs are beginning to be funded in a few states this year. Oregon and Colorado’s programs were both enacted on January 1st. Any clients with at least one Oregon employee (including remote) and 25 employees total, or one Colorado employee and 10 employees total, will be required to make employer contributions on their behalf to those programs. When Maryland’s paid leave program is enacted on October 1, 2023, any clients with at least one Maryland employee and at least 15 employees total will be required to make employer contributions. For all state paid leave programs, even small business clients that aren’t required to make an employer contribution still need to remit taxes on behalf of any eligible employees to cover the employee portion of paid leave contributions.
New state-level legislation rolling out in 2023 will affect payroll for some clients. For example, starting on January 1st, all Maine private employers with more than 10 employees are required to pay out unused vacation time in an employee’s last paycheck, no matter the reason for the end of their employment. California passed a host of new legislation that could potentially affect clients with remote workers in the state, including expanding requirements around payroll deposit retirement savings arrangements.
Ways CPAs Can Help Clients with Payroll Compliance
Watch out for multi-state and nexus issues. Even though a lot of people returned to the office after 2020, remote work is here to stay. Clients who employ remote workers may have to jump through more payroll compliance hoops than a client with an entirely local workforce. Every time a new hire is added from a different state, an employee relocates to a new state, or an employee’s job changes enough to warrant reclassification, the client’s CPA should be looped in. Complying with payroll and tax guidelines across multiple states can become confusing for clients, especially when those guidelines change from year to year.
Consider offering a payroll compliance audit. Even when an audit isn’t required under collective bargaining agreements or as related to an employee benefits plan, a client might benefit from having their CPA do a thorough analysis of their payroll compliance status. Especially if the client is newly established or has grown its operations over the past year, there could be gaps or oversights in their payroll and payroll tax reporting processes. Obviously, it’s far better for a client to discover from their CPA that they’ve been underpaying taxes or calculating tipped workers’ pay incorrectly instead of learning about it from the IRS later on.
A CPA can also flag any payroll compliance issues that might arise in the coming year. Clients focused on growth might not be thinking about how hiring new staff could change payroll obligations. Adding more employees could push the client across a threshold that requires them to pay a higher minimum wage or make employer contributions to paid family leave programs, for example. Or, maybe a client is considering merging or even possibly closing down sometime this year. Their CPA can be tremendously valuable by helping strategize around many elements of that transition, including maintaining payroll compliance throughout.
For CPAs in ConnectPay’s CPA Partners program, there’s no guesswork involved in helping clients maintain payroll compliance. Getting answers for everything from 30-second questions to complex multi-state payroll tax issues is as easy as calling your Connected Service Representative. Connect with us now to learn more.
Melissa Link is the Operations Manager for ConnectPay. With over 22 years of experience in payroll, Melissa leads the powerful team of client-facing representatives that process payroll and provide responsive, reliable service. When small business owners have questions, Melissa's team finds the answers! When there’s time, Melissa loves to get outdoors and get moving—usually to the beach!