Payroll Year-End Checklist and Tax Guide

As the year’s end quickly approaches, payroll departments can find themselves flooded with tracking down documents, completing paperwork, and filing forms with government entities like the IRS and SSA. Whether you’re a small business or a large corporation, having a payroll year-end checklist can help ensure you meet all deadlines and file the appropriate forms. In this guide, you’ll find all of the information needed for a smooth payroll year-end process.

Summary

• Payroll year-end refers to the system employers use to calculate employee taxes, deductions and compensation at the end of the year. An end-of-year payroll checklist can help employers ensure they’re maintaining compliance with local, state, and federal regulations regarding payroll taxes.
• End-of-year payroll takes place during the fourth quarter of the calendar year through the first quarter of the following year and includes the process of reviewing the latest tax law updates and calculating and verifying tax liabilities.
• A payroll year-end checklist should include several key forms, such as IRS Forms W-2, W-3, 1099-NEC, 1095 and 1095-B, Form 1096, Form 940, Form 941 and Form 944.
• Several actions should take place before the last payroll of the calendar year is completed, such as verifying business and employee information, verifying wages, taxes, and benefits, ordering tax forms and determining bonuses.
• After the last payroll of the calendar year is complete and final pay statements are disbursed, employers should finalize employee and business information, distribute W-2 forms to employees, file all payroll tax forms with the IRS and prepare for the following fiscal year.

What and When is Payroll Year-End?

Payroll year-end refers to the process of calculating employee taxes, deductions, and compensation at the end of the year. Payroll year-end takes place during the fourth quarter of the calendar year through the following year’s first quarter. Reviewing and verifying this financial information is crucial, as it ensures your business remains compliant with local, state, and federal governing bodies. Examples of year-end payroll tasks include identifying and making changes for the following year when new local, state, or federal regulations apply to your business, calculating and verifying your tax liabilities, and filing the correct forms with the IRS and SSA.

Forms You Need For the Year-End Payroll Process

There are multiple year-end forms for payroll that organizations need to be aware of. Failing to file a form or providing inaccurate information can lead to penalties, fines, and the possibility of an audit. To ensure you remain compliant this tax year, ensure the following year-end forms for payroll are complete:

• Form W-2: The W-2 form reports employees’ wages and withholdings to the IRS.
• Form W-3: The W-3 form goes to the SSA and is attached to employees’ W-2 forms that summarize the information. (not needed for electronic filing)
• 1099-NEC: Businesses must report wages paid to nonemployee contractors who earned over $600 on the 1099-NEC form. (transmitted with electronic filing)
• 1095 and 1095-B: Businesses with over 50 full-time employees must submit Form 1095, while self-insured small businesses submit Form 1095-B, which documents health insurance coverage offered to employees.
• Form 1096: Form 1096 is used by businesses that paid contractors using Form 1099-MISC, which summarizes their payment information. (not needed for electronic filing)
• Form 940: This form is used to pay Federal Unemployment Tax (FUTA) to the federal government.
• Form 941: Form 941 must be filed quarterly and reports payroll taxes collected from each employee for every quarter, which includes federal income taxes and social security and Medicare taxes.
• Form 944: For businesses that have payroll taxes of less than $1,000 annually, they will use this form to pay payroll taxes annually rather than Form 941, which is due quarterly.

Your Payroll Checklist

Now that you understand what year-end payroll is and the year-end payroll forms you need to submit, it’s time to get organized to ensure the end of the year goes smoothly. Use our payroll year-end checklist below:

Before Your Last Payroll of the Calendar Year

Before your last payroll of the year, there are certain tasks you should complete to ensure your payroll year-end process goes smoothly. Check off these tasks before you submit your last payroll of the calendar year:

• Verify your business information: As you start to prepare your payroll documents for the end of the year, make sure all of the information related to your organization is correct. Information to verify includes your company’s name, address, and state and federal employee identification number (EIN).
• Verify employee information: Another important task to complete during the payroll year-end process is verifying employee information, such as their Social Security numbers listed on their W-2 forms, their names, their addresses, and their contact information. This way, you can avoid delays and potential penalties.
• Verify wages, taxes, and benefits: After verifying company and employee information, the next task on your payroll year-end checklist is verifying wages, taxes, and benefits to ensure this information lines up on your payroll. Some critical pieces of information to verify include worker status, filing status, exemptions, PTO, and wages and taxes.
• Order your tax forms: As the year nears its end, make sure to order all necessary forms from your payroll service provider, such as W-2, W-3, and other tax forms.
• Determine bonuses: If your organization provides bonuses to employees, award them before the end of the year, as these may be tax-deductible.

After Your Last Payroll of the Calendar Year

After you’ve submitted your final payroll of the year, your responsibilities aren’t over. There are several tasks on any payroll year-end checklist that need to be completed after you’ve run your last payroll, such as:

• Finalize employee and business information: Before submitting your final payroll, make sure to go over employee and business information one final time to verify the information and look for discrepancies such as missing or misspelled names, addresses, or Social Security numbers, as well as wages and taxes.
• Distribute W-2 forms to employees: Form W-2 provides information to employees about the income they earned throughout the year. Once you’ve completed Form W-2 for all employees, distribute them to each employee by January 31st of the following calendar year.
• File payroll tax forms with the IRS: In some cases, your business may owe taxes to the IRS at the end of the year. If this is the case, pay these taxes by March 15th of the following calendar year.
• Prepare for the next fiscal year: After the payroll year-end process is complete, the final task is to start preparing for the next year. In some states and localities, governments may increase the minimum wage on the first day of the new year, which is important to note when determining compensation for the following year. It’s also important to prepare your new payroll schedule and make note of any holidays, deadlines, and important dates that can affect your payroll.

Making Payroll Easy

The payroll process can be complex and time-consuming, especially when the end of the year quickly approaches. At Experian Employer Services, our payroll tax solution makes it easy to prepare year-end tax statements that are accurate and compliant.

Schedule a demo with Experian Employer Services today to see how you can streamline your business processes to improve efficiency and your bottom line.

FAQs

What happens if I miss a deadline for filing a year-end payroll tax form?

If you miss the deadline for submitting your year-end payroll tax form, you may be subject to penalties and fines for late filing and interest charges on any taxes owed. It could also negatively impact employees, as they can cause delays in their tax refunds or other benefits. Implementing an end-of-year tax checklist can help prevent missed deadlines.

I’m a small business owner with only a few employees. Do I still need to file year-end payroll forms?

Yes, no matter the size of your business, you must still file year-end payroll tax forms to remain compliant with tax laws and regulations. For example, W-2 forms must be filed for every employee who earned wages, a salary or other compensation over $600 for the year.

Can I use the previous year’s payroll tax forms for the current year?

No, you must use current payroll tax forms for each year to ensure they accurately reflect the wages, taxes withheld and other relevant information for that tax year being reported.