Small Business Tax Changes 2020

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Income Tax Changes Challenge Small Businesses

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If you own a small business with more than one employee and have not consulted a qualified tax consultant for the 2020 tax changes, PADGETT BUSINESS SERVICES® suggests you should quickly find a well educated tax preparer.

“January 1, 2020 brings many changes to the tax world,” says Roger Harris, president and COO of PADGETT BUSINESS SERVICES®, which has affiliates throughout the United States and Canada. “Not only are companies dealing with new tax tables, but new employees and those needing to make changes to their withholdings are going to be faced with a completely different form to which they are accustomed.

“The small business needs the educated advice of a good tax consultant in making these changes for the new year. In addition, they need to be able to effectively explain to employees the importance of the middle section of the new W-4 form, which is the most important part of the form,” says Harris. He is concerned that employees will be so confused when faced with something so different from what they are accustomed  that they will simply sign at the bottom and leave the rest blank.”That omission will add problems to both the employer in determining the withholding and to the employee in terms of how much taxes will need to be paid,” says Harris.

Harris says that 2020 withholding is not necessarily based on an employee’s salary. The new form takes into account many other factors that influence a person’s tax responsibilitly such as an additional job or a spouse who also has an income. “Although the form might appear foreboding because it is different, the new form is really a good tool in helping a person estimate taxes,” says Harris. “Employers need to help educate employees of the value of the new W-4 and how they need to review their last tax filing before completing it or consult with their tax preparer. There are also online tables with the IRS.gov website that can help predict suggested withholdings.”

Because PADGETT BUSINESS SERVICES® is a stakeholder advisor to the Internal Revenue Service, Harris said it has had the advantage of being involved in the many phases of the development of the new form. As a result, the company was able to keep its 200 affiliates around the country updated on changes in order to effectively help their clients when the new forms and tax tables went into effect.

HINTS & HIGHLIGHTS

WHAT SMALL BUSINESSES NEED TO KNOW IN 2020

  • 2020 is the year to hire a good tax consultant as the changes in tax structure and law are complex.
  • ALL tax tables change in 2020 for ALL employees.
  • All new employees and those wishing to change their withholdings must use the new W-4 form.
  • Current employees with no changes can still use what was on their old W-4 form until they need to make changes.
  • Allowances are no longer the basis for withholding.
  • How completely an employee fills out the new W-4 is critical. The numbers an employee puts on the new W-4 are essential to calculating the withholding.
  • The amount you pay the employee might not be the basis for withholding.
  • Don’t keep doing things the way you have been doing them. It’s a whole lot different.
  • Education is important. You need to understand the changes so that you can correctly communicate them to your employees.

Headquartered in Athens, GA, PADGETT BUSINESS SERVICES® helps thousands of small businesses in the United States and Canada with a wide array of services including basic bookkeeping to tax planning and preparation, government compliance, payroll services, general business consulting and more.


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Topics: Payroll Services, Small Business, Small Business Payroll, Taxes