Top 10 Year-End Payroll Checklist
Businesses need to complete a number of tasks to close out the year’s finances. Here are the top 10 tasks to complete in order to wrap up payroll for the year.
- Ready your data and technology for the job. Update your payroll software. Ensure that you have current demographic, wage, and benefit information on all active and terminated employees. Confirm employees’ addresses and social security numbers, and verify congruence between employees’ names and social security numbers by using the Social Security Administration’s (SSA) Social Security Number Verification Service. Remember to address year-end bonus payments and employees with direct-deposit plans.
- Close out your books. Account for all company payments throughout the year and issue final paychecks to staff, including any bonuses. Don’t forget to take into account holiday or overtime pay for employees who worked shifts up to and including December 31. If you have staff participating in nonqualified deferred compensation plans, ensure that appropriate amounts are withheld from distributions. If you have flexible spending accounts that don’t allow grace periods, let employees know that unused amounts will be forfeited at year-end.
- Send the current year’s Forms W-4 to employees.
- Confirm year-end payroll deadlines and federal and state deposit deadlines, and review the holiday processing schedule.
- Order Forms W-2 and W-3 for the current tax year from the IRS. (Keeping a year-over-year spreadsheet of forms, recipients, quantities, and mailing dates can help streamline this task.)
- If you file Forms W-2 electronically, register with the SSA for a PIN.
- If your business prints its own Forms W-2, update your software for the current year and run test samples. Order W-2 envelopes. Send the SSA laser-printed substitute Forms W-2 (Copy A) and W-3 for approval.
- Check the IRS website to ensure you have the most recent Forms 941, 940, 944, and 945.
- Notify staff of next year’s paydays, social security taxable wage base, 401(k) pretax limit, and state unemployment/disability wage bases, if applicable.
- Ask your bank to prepare an early cutoff statement for December.
This checklist is not exhaustive, and not every item on this checklist may apply to your particular business. Customize your checklist by consulting the IRS’ Employer’s Tax Guide for 2014. Paychex also has extensive tax and payroll resources to help you complete end-of-year wage and reporting responsibilities.