2016 Year-End Payroll Checklist: 11 Tips
It's crunch time again, as employers put their payroll in order before the end of the year and begin preparations for tax time. Here's a list of 11 tasks you should consider completing before December 31.
- Ensure your payroll records are accurate. Review your payroll data, ensuring that you have the correct personal information as well as wage and benefit information for all active and terminated employees. You can verify that employees' names and Social Security numbers match government records by using the Social Security Administration's Social Security Number Verification Service.
- Have employees check their W-4 form for accuracy. Ask your employees to review their W-4 withholding form, confirming that their personal information and their federal, state, and local tax withholdings are correct.
- Order Forms W-2, W-3, and 1099. You must file your employees' 2016 Form W-2 wage and tax statements and Form W-3 to the Social Security Administration no later than January 31. If you paid any independent contractor more than $600 in 2016, you will need to provide him or her with a 1099 form by January 31. If you work with an outside supplier, aim to order the forms by late December.
- Get forms ready in-house. If your business prints its own W-2s, make sure your software is updated for the current year and run test samples. Order W-2 envelopes and send the SSA laser-printed substitute W-2 forms (Copy A) and W-3 for approval.
- Review 2016 changes. Several laws and rules changed in 2016, and contribution limits rose for 401(k) plans, HSAs, and other employee benefit accounts. It's important that you address any changes in your payroll administration before you close up the books.
- Get set up with the SSA. If you file W-2s electronically, make sure you are registered with the SSA.
- Close out the books. Issue all final paychecks and other payments for the year, including any annual employee bonuses or expense reimbursements. Don't forget to include any holiday and overtime pay for employee shifts through December 31.
- Remind employees of year-end FSA deadlines. If you offer your employees flexible spending accounts that don't allow for year-end rollovers—whether for health care or dependent care—remind them to use up those savings before they are forfeited.
- Know the deadlines. Confirm year-end payroll deadlines as well as federal and state deposit deadlines. Also, review the holiday processing schedule.
- Get the latest employment tax forms. Check the IRS website to ensure you have the most recent Forms 941, 940, 944, and 945. Review the deadlines for submitting each of these forms.
- Check that taxable fringe benefits were handled correctly. Make sure withholdings were handled correctly for any taxable fringe benefits granted to employees. These may include company-provided transportation or parking; personal use of a company-owned vehicle; bonuses; and group-term life insurance benefits (if coverage exceeds $50,000).
Of course, this isn't a complete list of everything that should be done by year-end and much depends on your payroll system and employment practices. By completing these tasks you’ll have a good start on making sure your business is prepared for the New Year.