Important 2016 Updates
Are you ready?
If you haven't already done so, it is time to review the pay rates of your employees to ensure compliance with the new minimum wage rates. Additionally, you should update any posters notifying employees of the minimum wage. Click here for the US Department of Labor's map of minimum wage laws by state.
State Minimum Wage Changes
State minimum wage changes effective December 31, 2015
- New York: $9.00 per hour ($9.75 for fast food workers in fast food restaurants). New York has had a myriad of changes; to read about the specifics to their minimum wage law click here.
- West Virginia: $8.75 per hour.
State minimum wage change effective January 1, 2016
- Alaska: $9.75 per hour.
- Arkansas: $8.00 per hour. The minimum wage is also scheduled to increase to $8.50 per hour on January 1, 2017.
- California: $10.00 per hour.
- Colorado: $8.31 per hour.
- Connecticut: $9.60 per hour. The minimum wage is also scheduled to increase to $10.10 per hour on January 1, 2017.
- Hawaii: $8.50 per hour. The minimum wage is also scheduled to increase to $9.25 per hour on January 1, 2017, and to $10.10 on January 1, 2018.
- Massachusetts: $10.00 per hour. The minimum wage is also scheduled to increase to $11.00 per hour on January 1, 2017.
- Michigan: $8.50 per hour. The minimum wage is also scheduled to increase to $8.90 per hour on Jannuary 1, 2017, and to $9.25 on January 1, 2018.
- Nebraska: $9.00 per hour.
- Rhode Island: $9.60 per hour.
- South Dakota: $8.55 per hour.
- Vermont: $9.60 per hour. The minimum wage is also scheduled to increase to $10.00 per hour on January 1, 2017, and to $10.50 on July 1, 2018.
State minimum wage changes effective July 1, 2016
- District of Columbia: $11.50 per hour.
- Maryland: $8.75 per hour. The minimum wage is also scheduled to increase to $9.25 on July 1, 2017, and to $10.10 on July 1, 2018.
State minimum wage change effective August 1, 2016
- Minnesota: Large employers $9.50 per hour; small employers $7.75 per hour.
States with Indexed Automatic Annual Adjustments
The following states automatically (or will) adjust their minimum wage annually based on the consumer price index or some other type of index:
- New Jersey
- South Dakota
- Alaska (beginning January 1, 2017)
- District of Columbia (beginning July 1, 2017)
- Minnesota (beginning January 1, 2018)
- Michigan (beginning January 1, 2019)
Furthermore, several states (California, Hawaii, Michigan, New York, South Dakota, and Vermont) have increased the minimum wage for tipped employees in the hospitality industry, and others have created new classes of workers (fast-food employees for example) that receive a separate wage rate increase. Click here for information by state.
IRS 2016 Business Travel Rate Updates
The IRS updated the per diem rates for business travel starting October 1, 2015 (the start of fiscal year 2016).
Key Items To Note:
- As an alternative to reimbursing employees for expenses they incur while traveling, employers can pay them a per diem amount, or daily allowance, for lodging, meals and incidentals.
- The rates are IRS approved and vary depending on where your employees travel.
- Instead of the usual record keeping requirements for business travel, per diem rates allow you to pay the specified amount to employees without any extensive paperwork.
- The only thing you need to have record of is the time, place and business purpose of the trip.
Starting October 1, 2015:
- Cost of traveling between places of lodging or business, and places where employees dine out are not considered incidental expenses.
- Mailing expenses resulting from filing travel vouchers and paying employer-sponsored charge card billings are not considered incidental expenses.
- The list of high-cost areas has been updated in IRS Notice 2015-63.
- The per diem rate for all high-cost areas within the continental U.S. has increased $16 from its prior rate and is now $275; $207 for lodging and $68 for meals and incidentals.
- The per diem rate for all low-cost areas within the continental U.S. has increased $13 from its prior rate and is now $185; $128 for lodging and $57 for meals and incidentals.
Other Items to Note:
- If you use the high-low method for an employee, you have to keep using it for all business travel reimbursement (within the continental U.S.) for the entire calendar year.
- The per diem rate cannot be paid to individuals who own 10% or more of the business.
- When deducting reimbursed amounts to employees on your company's tax return, you have to treat meals and incidental expenses as a food and beverage expense subject to the 50% deduction limit on meal expenses.
- You have to continue using the same method (per diem or high-low) for an employee's travel reimbursement in the last 3 months of the calendar year that you used during the first 9.
Since the IRS is highly critical of business travel expense reporting, per diem substantiation might be a helpful alternative; especially considering the simplified record keeping requirements. It is best to contact your tax advisor if you are unsure whether your company should use per diem rates to reimburse employees.
Have a question? Contact us!
For more information about minimum wage and other compliance issues, contact Carrie Wiegand via email, or Cindy McSwain using her information below.
Senior Vice President
Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to directing the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned clients.
Her current clients cross many industry sectors, including manufacturing, distribution, restaurants, retailers, medical, and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.
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