Each quarter, we bring you an overview of notable updates in the world of payroll and tax compliance–giving you clear concise insights to help you stay informed, avoid costly missteps, and stay ahead of regulatory changes.
Payroll & Tax Deadlines
Ensuring payroll compliance this quarter means keeping track of key tax filing and deposit dates. Here are some critical upcoming deadlines:
- July 31, 2025 – Form 941 (Q2) due
- August 10, 2025 – FUTA deposit deadline (if liability > $500)
- September 15, 2025 – Q3 estimated taxes due
📌State-level deadlines may vary—please refer to your state’s Department of Revenue.
Legislative & Regulatory Updates
- IRS: Electronic filing requirements now apply more broadly, affecting more midsize organizations.
- DOL: Clarifications on the overtime exemption rule may impact classification decisions.
- State Activity: Paid Family and Medical Leave changes continue across several jurisdictions.
- Remote Work: Increased enforcement of state nexus laws tied to employee work location.
- AI & Automation: EEOC guidance now includes responsible use of AI in payroll and HR decision-making.
Key Legislative Updates (OBBBA Highlights)
- Tips: Exempt from Federal Income Tax (up to $25,000); FICA still applies
- Overtime Pay: FIT exemption applies only above base rate (up to $12,500); FICA still applies
- W-2/1099 Reporting (2025): Must include qualified tips and OT premiums
- 1099 Threshold: Rises from $600 to $2,000 in 2026
- PFML Tax Credit: Permanent, with broader employer eligibility
- ERC Claims: Disallowed after January 31, 2024
- Transitional year (2025): IRS will allow approximations using safe harbor methods
Compliance Trends
- Crackdown on contractor misclassification
- New guidance around earned wage access (on-demand pay)
- Tightening of overtime exemption thresholds
Family & Childcare Benefits
- Childcare Credit Cap: Increased from $150K → $500K (indexed)
- Small Businesses (<$31M revenue): Can claim up to 50% of qualified expenses
- PFML: Includes both voluntary and required leave; employee eligibility reduced from 1 year to 6 months
State & Local Changes
- Wage/PFML Law Updates (not an inclusive listing) in: CA, FL, IL, MA, WA, DE, ME, MD, AK, AZ, MO, NE
- New York Metropolitan Commuter Transportation Mobility Tax (NYMCTMT)
- Effective July 1, 2025, updated MCTMT rates apply for employers operating in the Metropolitan Commuter Transportation District. The rate adjustments may affect your payroll tax calculations.
- See updated NYMCTMT rates and requirements
Looking Ahead
- SECURE Act 2.0 (2027): Secure Act 2.0: Expanded retirement plan auto-enrollment requirements are already in effect, but section 603 is coming soon. (i.e. high earners 2026 catch-up contributions must be Roth (after-tax))
- Student Loan Repayment (IRC §127): $5,250/year tax-free employer contributions made permanent
Best Practice Tip
- Mid-Year Payroll Audits: Now is a great time to review payroll practices for compliance with federal and state rules. Ensure correct tax withholdings, employee classifications, and wage garnishment processes are up-to-date.
Need Help Navigating Compliance with SAP Payroll?
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Disclaimer: This newsletter is for informational purposes only and does not constitute legal, tax, or financial advice. Regulations are subject to change. For specific advice, please consult your legal counsel or CPA. We make no representations or warranties regarding the accuracy or completeness of the information provided.
