One of the many challenges home health agencies face is how to stay compliant with ever-changing payroll requirements. That makes 2020, with its broad set of complex changes, a crucial year for home-based care agencies.
With new federal laws — starting with a more demanding W-4 form — in addition to already complex federal and state laws, providers of both home health and home care services face a potentially unprecedented wave of challenges in payroll compliance over the next 12 months.
“Home health care is a growing industry where people are trying desperately to find and retain good caregivers — given that, home care agencies want to make sure that payroll is done right,” says Malka Trump, director of compliance at payroll technology company Viventium.
“It would be unfortunate for any money to be spent on penalties because agencies are improperly calculating depositing or filing payroll taxes,” she says. “All it takes is one or two mistakes to have a huge financial impact on the agency and, even worse, reputational damage.”
For home health agencies to avoid these mistakes, there are three questions they should ask:
- Do I know the regulatory changes? Did I even know the law before it changed?
- Do I know if a given regulatory change applies to my agency?
- If the change applies, how does my agency address it?
Agency leaders should apply these questions to each area of payroll compliance in 2020. Here is a look at how to apply them to new rules, both federal and state.
Payroll compliance, federal changes
On the federal level, several changes will dominate home health in 2020. Among the most significant is the new overtime threshold of $684 a week, up from $455 a week.
But the top payroll compliance challenge for home health care agencies is one affecting employers in all industries: the new W-4 form. The form, which dictates the amount of federal income tax an employer withholds from an employee, has been updated to “[reduce] the form’s complexity and [increase] the transparency and accuracy of the withholding system,” according to the Internal Revenue Service.
What this means for home health agencies, Trump says, is that all new employees will have to fill out the new W-4, creating several unique pain points for employees and employers.
“That whole concept of allowances doesn’t exist anymore in 2020,” Trump says. “The W-4 is completely different. It’s like a mini tax return now.”
A home health care agency approaching the new W-4 would quickly realize that yes, they know the regulatory change — the shift is massive and well publicized — and yes, they know it applies to their agency. Yet addressing the change is harder. A technology partner can help guide the agency through the process, helping determine which employees are affected and what information they will need to provide.
“For your employees, one of the most important things, especially when you are hiring all the time, is to have a seamless onboarding procedure,” Trump says. “We’ve done the research, we’re very familiar with the form, we’ve had multiple webinars and we’ll continue to have those webinars to educate people on how to properly address the new changes.”
Payroll compliance, state challenges
While federal changes are widely publicized, state changes can be harder to track. One of the biggest ongoing payroll issues home health agencies face is the complexity around proper taxation for mobile employees. In general, taxes are withheld based on where the employee works, not where they live, Trump says.
“But things can get complicated with reciprocal agreements, where some states get together and, in an effort to actually make things easier for employees, they formalize an agreement that an employee will only have to withhold in the state where they live, even when they cross state lines to work — something that comes up in the home health and home care businesses,” she says.
This gets even trickier on the local level, especially in cities or townships that use tax leveling, including in Kentucky, Ohio and Pennsylvania, Trump says.
“The question is, if an employee works in one township but lives in another, where do you take out the taxes?” she says. “That’s always a big issue and can definitely affect the home health agency industry.”
Viventium’s solution is its Geo-Tax Location software, which automates the process by asking employers to merely enter each employee’s home address and work addresses into the system. The software then determines the withholding rules for that employee based on the state and the locality.
“It really takes the guesswork out of it, and takes a lot of the research out of it, because that’s all being done on the backend by our system,” Trump says.
The new W-4 and the rules around reciprocity and jurisdictional withholding are just two of the many payroll compliance challenges in play in 2020.
“These are just a few examples where agencies can find themselves out of compliance,” Trump says. “Rather than choosing generic payroll solutions, agencies would benefit from industry experts in home care payroll and HR.”
Payroll compliance is a team effort — as is choosing the right payroll compliance partner. To learn more about how Viventium can help, visit Viventium.com.