Numerous changes to wage and tax regulations will impact businesses in 2014 and, given that some will require payroll system revisions, now would be a good time to review and begin preparations.
Firstly, minimum wages will increase in both Nevada and California in 2014. Effective Jan. 1, Nevada businesses are required to pay a minimum hourly wage of $7.25 if they provide a qualifying health care plan, or alternatively a minimum of $8.25 if no such health care plan is provided.
In California, the minimum wage of $8 will increase to $9 per hour effective July 1 and to $10 per hour effective Jan. 1, 2016. These increases reflect the first required increase in California since 2008. Also new, AB 442 provides that an employer who fails to comply with the minimum-wage law may be required to pay liquidated damages to the employee in addition to existing penalties.
Secondly, there are also new IRS regulations that will greatly impact local restaurants and hospitality providers who charge a “compulsory” gratuity such as that added to the check for a large dinner party or included as part of a banquet function. This gratuity is to be considered a service charge for tax purposes. The payment to the employee is to be treated as wages, which could result in an employee having a different pay rate on any given day. The employer will be required to treat the employee’s pay out as wages including paying social security and Medicaid. However these wages are not to be included for purposes of meeting the minimum wage requirement.
There are also some positive ongoing tax benefits for small businesses such as those provided under the HIRE and Small Business Job Acts. I am hopeful that I’ve inspired all businesses to meet with their tax professional now to capitalize on the opportunities and prepare for the challenges. TahoeChamber counts among its members numerous experts who work with both small and large businesses. Please call or visit www.tahoechamber.org if we can assist in connecting you to a resource.
— Betty “B” Gorman, J.D., B.S., A.C.E., is the president and CEO of TahoeChamber.