Payroll and benefits outsourcing provider Paychex has released its "Top 12 in '12," a checklist containing the top 12 potential regulatory changes that America's small and midsized businesses should know about in 2012.

The top regulatory challenges are:


Job creation. While President Obama's Jobs Bill wasn't passed in the same form it was proposed, legislation was passed in 2011 to provide tax credits for hiring veterans and relief for the long-term unemployed. Additionally, after much debate, the temporary reduction of employee payroll taxes, due to expire on December 31, 2011, was extended for an additional two months and includes a new "recapture" provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period.

Worker classification. The misclassification of workers is an issue that promises to receive more scrutiny in 2012. The IRS recently unveiled an opportunity for eligible employers to voluntarily reclassify workers as employees in exchange for partial tax relief from past federal employment taxes.

Deficit reduction. Running parallel to the jobs initiatives are a series of proposals that focus on reducing the record-high federal budget deficit through spending reductions and tax increases.  Many of the ideas on the table center on personal and business tax reform and the closing of current tax "loopholes."

Immigration. The government is strengthening efforts to crack down further on the employment of illegal immigrants through rigorous worksite enforcement and paperwork inspections of companies of all sizes. In 2012, state laws will require more private sector employers to register and utilize the federal E-verify system for employee verification, and most Federal contractors and subcontractors will continue to be required to use E-verify to determine employment eligibility.

Employment law. Employers will need to keep current with federal and state legislative and regulatory developments that are likely to impact human resource practices. Many states now restrict the use of an employee's credit information in employment-related decisions or are considering doing so. Additionally, the U.S. Department of Labor and many states have enacted or are considering regulations to provide greater transparency to workers.

Security and privacy. Instances of cybercrime and corporate bank account takeovers against small businesses are becoming more widespread. Employers should take security precautions such as using stand-alone computers for online banking, not clicking on attachments or hyperlinks from unknown sources, and working with their bank to implement fraud detection tools on their accounts. 

Dodd-Frank. The sweeping Dodd-Frank financial regulatory legislation is primarily focused on Wall Street reforms and consumer protection. However, the increased burden it places on some industries, especially banks, may result in small businesses experiencing limited availability of, or higher costs for, credit or other financial services.

Health care reform. The Supreme Court is expected to rule in 2012 on the constitutionality of the individual mandate provision in the Affordable Care Act. The court's decision, and the potential fallout, could have broad impacts to businesses.

Unemployment insurance. Congress is contemplating the reinstatement of the federal unemployment surtax, which would result in virtually all businesses seeing higher unemployment insurance taxes. Companies in many states will see higher taxes due to the repayment of outstanding federal loans that were taken to allow for continued payment of benefits and to replenish depleted state unemployment trust funds.

401(k). In 2012, additional fee disclosures will be required by 401(k) service providers to plan sponsors, and by plan sponsors to participants, with the intention of providing greater transparency around retirement plan fees. The limits for contributions to those plans will increase in 2012.

Taxes. 2012 will bring a number of important tax changes, including a higher Social Security wage base and changes to transportation and adoption assistance benefit limits. The accelerated depreciation benefits available to most businesses for certain asset purchases which were in place in 2011 may expire or be scaled back in 2012. All employers will need to keep an eye on what are likely to be additional tax changes as the year progresses.

Form W-2. The IRS further delayed the requirement for smaller employers to report the cost of employer-sponsored health coverage on employee Forms W-2, indefinitely postponing it until further guidance is issued.  However, employers filing 250 or more Forms W-2 in 2011 are required to include this cost on the W-2 starting in tax year 2012.  


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