As we kick off the new year, we want to inform you about the latest updates in federal and state (Minnesota) laws that may affect your business. January is also a good time to draw your attention to a couple of other matters – specifically, checking your 1099s and ensuring that everything is accurate for proper income tax reporting.
Federal Updates
IRS Mileage Reimbursement Rate
The IRS standard mileage rate has increased to $0.67 per mile in 2024, up 1.5 cents from 2023. This rate applies to all vehicles, including electric and hybrid vehicles.
Using this rate is voluntary. However, it is widely acknowledged as a convenient and standard reimbursement rate for employees using their personal vehicles for work.
Expanded OSHA Reporting
Establishments with 100 or more employees in high-hazard industries must now electronically submit detailed information to OSHA about each recordable injury and illness entered on their Form 300 and Form 301.
According to this OSHA Fact Sheet, access to this data will allow OSHA to have direct interaction with establishments for enforcement and outreach activities. Additionally, this information will be available to other interested parties, such as employees, potential employees, customers, and the general public.
New Minnesota Laws and Updates
Since many of our clients are in Minnesota, we’ll update you on three new employment laws implemented in this state, as well as changes to the Pass-Through Entity (PTE) tax.
If you are located outside of Minnesota, make sure to check with your state Labor Office to be in compliance with any new laws taking effect in the new year.
Earned Sick and Safe Time (ESST)
Effective January 1, 2024, Minnesota’s Earned Sick and Safe Time (ESST) law requires employers to provide one hour of paid ESST leave for every 30 hours worked to employees who work at least 80 hours annually. Sick and safe time can be used when an employee is sick, to care for a sick family member, or to seek assistance if an employee or their family member has experienced domestic abuse, sexual assault or stalking.
Employers pay ESST at the same hourly rate the employee earns while working. Unless the employer chooses a higher amount, employees may earn a yearly maximum of 48 hours.
If employers offer Paid Time Off (PTO) at or higher than the ESST rate, it fulfills the legal requirements, and there’s no obligation to specifically label it as ESST.
For more information on Earned Sick and Safe Time, click here.
Pay History
Beginning January 1, 2024, employees are not allowed to ask prospective employees about their current or past pay either on an application, in an interview, or as part of salary negotiations. This applies to all employers in the public, private, and nonprofit sectors. Employers should base compensation on an applicant’s skills, educational background, certifications, licenses, and other qualifications. Additionally, they should take into consideration the current job market.
The Minnesota Department of Human Rights contends that “this new law will bring Minnesota one step closer to narrowing the gender and racial pay gap.”
For more information on pay history, click here.
Minimum Wage Increase
Minnesota’s minimum-wage rate adjusted for inflation on January 1, 2024. This structure was first enacted by the state legislature in 2014. Large employers (annual gross revenue of at least $500,000) must pay at least $10.85 per hour, an increase of twenty-six cents. Small employers (annual gross revenue less than $500,000) must pay at least $8.85 per hour, an increase of twenty-two cents.
Minneapolis and St Paul also have their own minimum wage standards, which are higher than the state minimum wage.
For more information on the minimum wage increase, click here.
Pass-Through Entity Tax (PTE) Changes
Basically, the pass-through entity tax (PTE) allows partnerships, S corporations, and LLCs taxed as S corps or partnerships to be taxed at the entity level for state income tax purposes. (For more in-depth understanding, we delved into more details and an example in this post.)
Some of the changes include:
- allowing partial elections, if not all owners are qualifying owners
- removing the requirement that one qualifying owner must be subject to the limitation on state and local taxes (SALT cap)
- clarifying that PTE taxes paid to another state may qualify for the Minnesota Credit for Taxes Paid to Another State
You can find a comprehensive list of changes here, and you can find more details on Minnesota’s PTE Tax laws here.
General Information for Small Businesses
For Cash-Basis Business
Although we suggest recording checks in your bank register as you write them, we understand that this isn’t always feasible or preferable. Many people simply rely on transactions coming through the bank feed in QuickBooks and then categorize and post them in the bank register.
For cash basis business, however, we suggest monitoring paper checks that are coming through your bank feed in the new year. Although these checks might be cashed in the new year, be sure to verify the actual check date to confirm if it was written in the previous year. This ensures that you properly account for expenses in the previous year for accurate tax filing and when generating necessary 1099s.
Form 1099
January 31st is the deadline for sending 1099s to non-employees for services they provided to your business. For more information on which of your vendors may need a 1099, we encourage you to check out this article.
In summary, as you journey through the new year, staying informed about key updates in federal and state laws is vital. Should you have any questions or concerns regarding preparation for your 2023 taxes or how to implement new employment laws, feel free to reach out – we’re here to help!