--- title: "Compliance in 2020: New Year, New Payroll Changes" description: When employers process payroll in 2020 they need to be aware of these 6 payroll changes now in effect including new minimum wages, 2020 Form W-4 and more. image: https://blog.axcethr.com/hubfs/jan%208%20blog%20image.webp --- - [Client Portal](https://www.axcethr.com/client-services/) - [Employee Login](https://www.axcethr.com/client-services/) [![AxcetHR Solutions Blog](https://blog.axcethr.com/hubfs/AxcetHR2021%20Blog/axcethr_logo_white%20(1).png)](https://www.axcethr.com/) - [About Us](https://www.axcethr.com/about-us/) - [Corporate Philantropy](https://www.axcethr.com/about-us/corporate-philanthropy/) - [Meet the Team](https://www.axcethr.com/about-us/meet-the-team/) - [Values and Culture](https://www.axcethr.com/about-us/values-and-culture/) - [Kansas PEO](https://www.axcethr.com/about-us/kansas-peo/) - [Missouri PEO](https://www.axcethr.com/about-us/missouri-peo/) - [Careers](https://axcethrsolutions.prismhr-hire.com/) - 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- - - [whatsapp://send?text=https://blog.axcethr.com/compliance-in-2020-new-year-new-payroll-changes](whatsapp://send?text=https://blog.axcethr.com/compliance-in-2020-new-year-new-payroll-changes) - [mailto:?subject=Compliance%20in%202020:%20New%20Year,%20New%20Payroll%20Changes&body=https://blog.axcethr.com/compliance-in-2020-new-year-new-payroll-changes](mailto:?subject=Compliance%20in%202020:%20New%20Year,%20New%20Payroll%20Changes&body=https://blog.axcethr.com/compliance-in-2020-new-year-new-payroll-changes) ![jan 8 blog image](https://blog.axcethr.com/hs-fs/hubfs/jan%208%20blog%20image.webp?width=840&name=jan%208%20blog%20image.webp) As we turn the calendar to a new year, we also must understand and ensure compliance with the various new employment laws, including payroll changes, that took effect on January 1, 2020. Here are six changes employers need to know when processing payroll this year. **1.  FICA Taxes ** FICA, or the Federal Insurance Contributions Act, requires employers to withhold money from employee paychecks to fund Social Security and Medicare. The amount withheld may be listed as a single line item, like FICA, or separated out by the federal program. Even when combined as “FICA”, two separate calculations go into calculating withholding. Here’s what changes in 2020: ***Social Security:*** While the Social Security payroll tax holds at 6.2% in 2020, the taxable wage base (maximum amount of earnings to be taxed on) increases to $137,700 (up from $132,900 in 2019). ***Medicare:*** The Medicare tax is unchanged in 2020 and remains at 1.45%. For those earning more than $200,000 per year, an additional 0.9% surtax applies to the amount earned that exceeds $200,000. **2.  Form W-4** Effective in 2020, [Form W-4](https://www.irs.gov/pub/irs-prior/fw4--2020.pdf) receives its first major update since the Tax Cuts and Jobs Act was signed into law in December 2017. While filers are only required to fill out the new form if they start a new job *or want to make adjustments to their current withholding*, there is a clear advantage for additional taxpayers to fill out the new form, too. The sweeping changes to the tax law made it so many Americans saw more take-home pay, but they may have received a smaller refund or owed money when filing their income taxes. Completing the IRS recommended paycheck checkup and filling out the new form can help ensure correct withholding in 2020.  [![Related Reading - Ask the Payroll Expert: How to Perform a Paycheck Checkup](https://no-cache.hubspot.com/cta/default/2652187/15c054a9-412f-4596-ab9e-2d74f3abbe7c.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/15c054a9-412f-4596-ab9e-2d74f3abbe7c) Employers should be aware that employees may find it necessary to look up details from last year’s individual income tax return to determine how to complete the form. As compared to the previous version, the new W-4 will likely require more time for the employee to complete.  Here’s what changes with the new W-4 in 2020: ***Allowances Are Gone:*** The allowances question no longer exists, as it does not align with the new tax law, which eliminated personal exemptions and increased the standard deduction and the child tax credit. Instead, the new W-4 asks how many children and dependents the taxpayer has.  ***Five-Step Process:*** The new 2020 form takes a five-step approach, but for those with a simple tax situation, non-applicable questions can be skipped and a standard-deduction can be taken. The five-steps include basic information, dependents, other adjustments, and signature and date. **3.  Employee Benefits Contribution Limits** Many pre-tax contribution limits to popular employee benefits accounts increased for 2020.  Here’s what changes in 2020: ***401(k):*** The annual contribution limit increases to $19,500, up $500 from $19,000 in 2019. This also applies to 403(b), most 457 plans and the federal government’s Thrift Savings Plan. The combined employer and employee contribution limit rise by $1,000 to $57,000. For individuals aged 50 and over, catch-up contribution limits increase to $6,500 for 2020, which is up $500 from 2019. [![401k contribution limits rise in 2020](https://no-cache.hubspot.com/cta/default/2652187/42fa4df7-0404-4635-9b1a-6ab913844d70.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/42fa4df7-0404-4635-9b1a-6ab913844d70) ***Health Savings Account (HSA):*** An additional $50 can be contributed for self-only coverage and $100 for family coverage bringing the annual limit on HSA contributions to $3,550 for self-only and $7,100 for family coverage. ***Flexible Spending Account (FSA):*** In 2020, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,750, up $50 from 2019. There was no change to the dependent care flexible spending. ***Commuter Benefits:*** Pre-tax contributions to commuter benefits accounts rise to $270 per month in transit passes and $270 per month for parking expenses.   **4.  Minimum Wage** Across the country in 2020, minimum wage workers in 24 states will see an increase in hourly pay, with 20 states making the increase effective January 1. Of local interest, Missouri raised its minimum wage from $8.60 per hour to $9.45 per hour effective January 1, 2020. The highest minimum wage in the country is currently in Washington, D.C., which will increase to $15 per hour in mid-2020, followed by Washington at $13.50 per hour and California at $13.00 per hour. [See the full list of states with increased minimum wage in 2020 here](https://www.usnews.com/news/articles/best-states/minimum-wage-by-state). Always check with your local authorities for the most current rates. **5.  New Overtime Rule** On September 24, 2019, the US Department of Labor (DOL) announced its final “overtime rule” which ***took effect January 1, 2020***. The new mandatory overtime pay rule extends overtime pay to an additional 1.3 million U.S. workers. Among its changes, the new rule raises the standard salary level for exempt executive, administrative and professional employees from $455 per week to $684 per week, which is equivalent to $35,568 per year. [![DOL new overtime rule 2020](https://no-cache.hubspot.com/cta/default/2652187/c9927ee5-e883-4e8b-b4e4-f12578ea2127.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/c9927ee5-e883-4e8b-b4e4-f12578ea2127) **6.  Leap Year** Happy 2020 … and happy leap year! Every four years we encounter a leap year, which means February has 29 days instead of 28.  Does this impact your payroll? Check with your payroll professional for details. For small business owners, managing payroll while ensuring compliance with state and federal laws can be overwhelming and the cost of non-compliance can be steep. At Axcet HR Solutions, we have more than 30 years of experience helping small and medium-sized businesses with all of their [payroll and tax compliance needs](https://www.axcethr.com/services/payroll-and-tax-administration-services/payroll-compliance/). **No Legal Advice** The information and materials on this site are provided for informational purposes only. They do not necessarily represent the position or opinions of Axcet HR Solutions or its employees, and they do not constitute legal advice.  You should consult with a qualified lawyer of your choice who is familiar with all of the facts of your situation before making a decision about any legal matter. [![PEO Payroll Services](https://no-cache.hubspot.com/cta/default/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4) [![Jo McClure, CPP](https://blog.axcethr.com/hs-fs/hubfs/Jo-24.jpg?width=80&height=80&name=Jo-24.jpg)](https://blog.axcethr.com/author/jo-mcclure) Written by #### [Jo McClure, CPP](https://blog.axcethr.com/author/jo-mcclure) Jo McClure, CPP, is the Director of Payroll Administration at Axcet HR Solutions, where she has been a pivotal leader for over 20 years. With more than two decades of experience in payroll outsourcing and professional employer organizations (PEOs), Jo specializes in helping small to mid-sized businesses navigate payroll administration, employee benefits, and compliance. Her strategic leadership at Axcet focuses on implementing best practices in payroll management, compliance auditing, and risk mitigation. Jo obtained her Certified Payroll Professional (CPP) designation in 2006 and has held numerous leadership roles in the Greater Kansas City Chapter of the American Payroll Association, including President, Vice President, and Chapter Coordinator. A frequent speaker at the Midwest Regional Payroll Conference, she has also contributed articles to publications such as *Thinking Bigger Business* and *Kansas City Small Business Monthly*. Jo’s expertise has been recognized through industry publications. She co-authored the article *“High-Touch in the Age of High-Tech: How PEOs Can Embrace AI Without Losing Their Humanity”* https://peoinsider.org/articles/high-touch-in-the-age-of-high-tech-how-peos-can-embrace-ai-without-losing-their-humanity/ for PEO Insider (March 2026), alongside Jeanette Coleman, SPHR, SHRM-SCP, and authored *“PEOs in the Community: Axcet Making Philanthropy Part of the Company’s Culture”* https://peoinsider.org/articles/peos-in-the-community-axcet-making-philanthropy-part-of-the-companys-culture/ (November 2025). These contributions reflect her perspective on balancing technology-driven payroll and HR processes with the human experience, as well as the role of community engagement in building strong organizational cultures. Jo's specialties include payroll implementation, compliance auditing, and crafting best-practice payroll solutions that ensure businesses stay compliant while optimizing their processes. Published in: PEO Insider Read more [View all posts →](https://blog.axcethr.com/author/jo-mcclure) ### Get HR Updates ### Table of Contents ### Related Resources - [services Human Resources](https://www.axcethr.com/services/human-resources/) #### [When There’s an Additional Pay Period; It’s Not Just a Leap Year Issue ![](https://blog.axcethr.com/hubfs/jan%2013%20blog%20image.png)](https://blog.axcethr.com/when-theres-an-additional-pay-period-its-not-just-a-leap-year-issue) #### [![](https://blog.axcethr.com/hubfs/jan%206%20blog%20image%203.webp) Taking Time to Rethink PTO](https://blog.axcethr.com/taking-time-to-rethink-pto) ## Let us know what you think... ![AxcetHR Blog](https://blog.axcethr.com/hubfs/AxcetHR2021%20Blog/axcethr_logo_white%20(1).png) - [Why Axcet](https://www.axcethr.com/why-axcet/) - [What We Stand For](https://www.axcethr.com/about-us/what-we-stand-for/) - [Expertise](https://www.axcethr.com/expertise/) - [Employee Benefits](https://www.axcethr.com/services/employee-benefits/) - [Human Resources](https://www.axcethr.com/services/human-resources/) - [Payroll Services](https://www.axcethr.com/services/payroll-and-tax-administration-services/) - [Risk Management](https://www.axcethr.com/services/workers-comp-and-employee-safety-risk-management/) - [Meet the Team](https://www.axcethr.com/about-us/meet-the-team/) - [Subscribe to Latest Resources](https://www.axcethr.com/subscribe-to-the-latest-resources/) - [Resource Library](https://www.axcethr.com/expertise/resource-library/) - [\[ Client Portal \]](https://www.axcethr.com/client-services/) - - - - - Search for: Copyright © 2023 Axcet HR Solutions – Kansas City's PEO Since 1988 | [Privacy Policy](https://www.axcethr.com/privacy-policy/) | [Terms and Conditions](https://www.axcethr.com/terms-conditions/) | [**Join our Team – Careers »**](https://axcethrsolutions.prismhr-hire.com/) 10975 Grandview Drive Suite 200, Corporate Woods Building 27, Overland Park, KS 66210 | Call us: 913-383-2999 *The IRS does not endorse any particular For more information on [certified professional employer organizations](https://www.axcethr.com/why-axcet/certified-peo/), go to [www.irs.gov](https://www.irs.gov).* Remove cookies ![](https://dc.ads.linkedin.com/collect/?pid=43031&fmt=gif) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Jo McClure, CPP", "url" : "https://blog.axcethr.com/author/jo-mcclure" }, "dateModified" : "2024-07-19T19:52:06.189Z", "datePublished" : "2020-01-08T15:44:17.000Z", "headline" : "Compliance in 2020: New Year, New Payroll Changes", "image" : [ "https://blog.axcethr.com/hubfs/jan%208%20blog%20image.webp" ], "mainEntityOfPage" : { "@id" : "https://blog.axcethr.com/compliance-in-2020-new-year-new-payroll-changes", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.axcethr.com/hubfs/_logo_axcethr_primary.png" }, "name" : "Axcet HR Solutions" } } ``` ```json { "@context" : "https://schema.org", "@id" : "https://www.axcethr.com/#organization", "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "US", "addressLocality" : "Kansas City", "addressRegion" : "MO" }, "aggregateRating" : { "@type" : "AggregateRating", "bestRating" : "5", "ratingValue" : "5", "reviewCount" : "100" }, "areaServed" : { "@type" : "Country", "name" : "United States" }, "award" : [ "IRS Certified Professional Employer Organization (CPEO)", "Award-Winning HR Solutions Provider", "SHRM Certified HR Professionals", "HRCI Certified HR Professionals" ], "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "English", "contactType" : "Customer Service" }, "description" : "Award-winning Professional Employer Organization (PEO) providing comprehensive HR solutions, payroll services, employee benefits, and risk management to small and mid-sized businesses. 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Here are six changes employers need to know when processing payroll this year. 1. FICA Taxes FICA, or the Federal Insurance Contributions Act, requires employers to withhold money from employee paychecks to fund Social Security and Medicare. The amount withheld may be listed as a single line item, like FICA, or separated out by the federal program. Even when combined as “FICA”, two separate calculations go into calculating withholding. Here’s what changes in 2020: Social Security: While the Social Security payroll tax holds at 6.2% in 2020, the taxable wage base (maximum amount of earnings to be taxed on) increases to $137,700 (up from $132,900 in 2019). Medicare: The Medicare tax is unchanged in 2020 and remains at 1.45%. For those earning more than $200,000 per year, an additional 0.9% surtax applies to the amount earned that exceeds $200,000. 2. Form W-4 Effective in 2020, Form W-4 receives its first major update since the Tax Cuts and Jobs Act was signed into law in December 2017. While filers are only required to fill out the new form if they start a new job or want to make adjustments to their current withholding, there is a clear advantage for additional taxpayers to fill out the new form, too. The sweeping changes to the tax law made it so many Americans saw more take-home pay, but they may have received a smaller refund or owed money when filing their income taxes. Completing the IRS recommended paycheck checkup and filling out the new form can help ensure correct withholding in 2020. Employers should be aware that employees may find it necessary to look up details from last year’s individual income tax return to determine how to complete the form. As compared to the previous version, the new W-4 will likely require more time for the employee to complete. Here’s what changes with the new W-4 in 2020: Allowances Are Gone: The allowances question no longer exists, as it does not align with the new tax law, which eliminated personal exemptions and increased the standard deduction and the child tax credit. Instead, the new W-4 asks how many children and dependents the taxpayer has. Five-Step Process: The new 2020 form takes a five-step approach, but for those with a simple tax situation, non-applicable questions can be skipped and a standard-deduction can be taken. The five-steps include basic information, dependents, other adjustments, and signature and date. 3. Employee Benefits Contribution Limits Many pre-tax contribution limits to popular employee benefits accounts increased for 2020. Here’s what changes in 2020: 401(k): The annual contribution limit increases to $19,500, up $500 from $19,000 in 2019. This also applies to 403(b), most 457 plans and the federal government’s Thrift Savings Plan. The combined employer and employee contribution limit rise by $1,000 to $57,000. For individuals aged 50 and over, catch-up contribution limits increase to $6,500 for 2020, which is up $500 from 2019. Health Savings Account (HSA): An additional $50 can be contributed for self-only coverage and $100 for family coverage bringing the annual limit on HSA contributions to $3,550 for self-only and $7,100 for family coverage. Flexible Spending Account (FSA): In 2020, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,750, up $50 from 2019. There was no change to the dependent care flexible spending. Commuter Benefits: Pre-tax contributions to commuter benefits accounts rise to $270 per month in transit passes and $270 per month for parking expenses. 4. Minimum Wage Across the country in 2020, minimum wage workers in 24 states will see an increase in hourly pay, with 20 states making the increase effective January 1. Of local interest, Missouri raised its minimum wage from $8.60 per hour to $9.45 per hour effective January 1, 2020. The highest minimum wage in the country is currently in Washington, D.C., which will increase to $15 per hour in mid-2020, followed by Washington at $13.50 per hour and California at $13.00 per hour. See the full list of states with increased minimum wage in 2020 here. Always check with your local authorities for the most current rates. 5. New Overtime Rule On September 24, 2019, the US Department of Labor (DOL) announced its final “overtime rule” which took effect January 1, 2020. The new mandatory overtime pay rule extends overtime pay to an additional 1.3 million U.S. workers. Among its changes, the new rule raises the standard salary level for exempt executive, administrative and professional employees from $455 per week to $684 per week, which is equivalent to $35,568 per year. 6. Leap Year Happy 2020 … and happy leap year! Every four years we encounter a leap year, which means February has 29 days instead of 28. Does this impact your payroll? Check with your payroll professional for details. For small business owners, managing payroll while ensuring compliance with state and federal laws can be overwhelming and the cost of non-compliance can be steep. At Axcet HR Solutions, we have more than 30 years of experience helping small and medium-sized businesses with all of their payroll and tax compliance needs. No Legal Advice The information and materials on this site are provided for informational purposes only. They do not necessarily represent the position or opinions of Axcet HR Solutions or its employees, and they do not constitute legal advice. You should consult with a qualified lawyer of your choice who is familiar with all of the facts of your situation before making a decision about any legal matter.", "author" : { "@id" : "https://blog.axcethr.com/author/jo-mcclure#author", "@type" : "Person", "name" : "Jo McClure, CPP", "url" : "https://blog.axcethr.com/author/jo-mcclure" }, "dateCreated" : "2020-01-08", "dateModified" : "2024-07-19", "datePublished" : "2020-01-08", "description" : "As we turn the calendar to a new year, we also must understand and ensure compliance with the various new employment laws, including payroll changes, that took effect on January 1, 2020. Here are six changes employers need to know when processing payroll this year. 1. 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