New Regulatory Requirements for Small Businesses, Part 3

What new regulatory requirements from the federal government on down are small businesses facing in 2025? In this first of a three-part series, we will cover some of them, related to changes in and current status of tax policy.

First of all, the new year brings with it new payroll tax limits. Perhaps the most notable is that the Social Security wage base jumped by nearly 4.5%, to $176,100 from $168,600. Most of the other increases were more modest, such as the 401(k) contribution limit rising from $23,000 to $23,500, or business mileage reimbursement going from 67 to 70 cents.

On the business tax front, the stalling out of the Tax Relief for American Families and Workers Act of 2024 means that the proposed early phase-out of the Employee Retention Tax Cut (ERTC) did not take place last January. This means that barring further legislation, employers can still file amended returns to claim credit for 2021 until April 15, 2025.

In addition, if the Tax Cuts and Jobs Act (TCJA) of 2017 expires as scheduled on December 31 of this year, that would impact the current 21% corporate tax rate as well as business-related provisions like the ability under IRC section 199A for individual taxpayers doing business as a sole proprietorship, S corporation or partnership to deduct up to 20% of domestic qualified business income. Meanwhile, the impact of tariffs, if implemented, is difficult to calculate.

When it comes to individual taxes, the potential expiration of the TCJA also would have a number of consequences: the standard deduction would revert to $6,500 for single people and $13,000 for joint filers, the maximum child tax credit would be $1,000, and the deduction cap on state and local taxes (SALT) would be removed. In addition, small businesses should note that any changes to the income tax directly impact employer withholding, which changes how they need to calculate the corresponding Form W-4.

Elsewhere in terms of taxes, the expanded eligibility for and generosity of the Enhanced Premium Tax Credit, put in place by the American Rescue Plan Act of 201 and extended for three more years by the Inflation Reduction Act, is scheduled to sunset at the end of 2025.

Employers should still ensure they’re providing the required amount of credit for employees—or they may open themselves up to risk assessments. These only apply to so-called Applicable Larger Employers, however, who are subject to Employer Shared Responsibility Provisions if they have not offered adequate, affordable coverage for full-time employees.

We will have more to say about shifts in employment law, wage and hour developments, retirement compliance, and privacy vis-à-vis artificial intelligence in upcoming posts. Watch this space, and contact us, your Chicago-area small business attorneys, if you have questions or need consultation.  For more information contact Attorney Kelsey Feucht who is an attorney with the Chicago Business Law Firm of Bellas & Wachowski.