Steps to Prepare for End-of-Year Payroll
A careful examination and appraisal of your financial information is essential during the fourth quarter of the calendar year (October 1 through December 31) through the first quarter of the following calendar year (January 1 through March 31). Use your end-of-year payroll period to properly prepare your company and its personnel for the upcoming tax season. If you want to set yourself up for smooth and flawless financial reporting, you’ll want to start today by following these key preparative steps:
1. Research Regulatory Changes
Because financial and taxation regulations are constantly evolving, you must take the time to identify any relevant changes well in advance of the end-of-year payroll period. Be sure to research all new local, state, and federal employment codes that might impact your company in the upcoming year. If you begin your end-of-year payroll preparations without a full understanding of the regulations involved, you might make critical mistakes and waste precious time.
2. Confirm Employee Data and Check Employer Records
In advance of the tax season, it is vital to verify all employee and employer data needed to process company quarterly tax reports and annual W-2s. Remember that the Internal Revenue Service (IRS) is likely to impose penalties for W-2 forms that have missing or erroneous employee names or Social Security numbers.
To ensure that company records are current and updated, make sure that you have accurately recorded all paychecks for each employee as well as all extra payments employees (bonuses, commissions, and so on) beyond the regular payroll. It is particularly important to check all relevant tax rates/special items, wage bases, and all employee contributions to retirement savings and/or insurance coverage.
3. Look Up Time-Off Balances
Companies that provide paid time off (PTO) should take care to calculate the amount of time-off used and remaining for each employee. This is particularly important if the company has a “use it or lose it” policy that zeros out an employee’s time-off balance at the end of the year. In some cases, employees can choose to cash out their PTO for money.
4. Order Tax Forms
In the leadup to the 2024 tax season, employers or their qualified representatives must complete and file a number of required forms with the IRS, the Social Security Administration, and various state and local tax departments. If you can request this paperwork now, you will have one less thing to worry about during the often-hectic tax scramble of the early new year. Common forms to order include W-2s, W-3s, Wage and Tax Statements, and Transmittal of Wage and Tax Statements.
5. Make Final Verification of Employee Wages and Deductions
After finally completing your end-of-year payroll, one of your next tasks will be creating W-2 forms for all employees. To ensure the full accuracy of these forms in advance, you should carefully check all employee wage and deduction records to confirm that they are correct before beginning the W-2 reporting process.
Help with End of Year Payroll Processing
As the mad rush of the holiday season approaches, now is the time to begin preparing for your end-of-year payroll processing. Wise business leaders know that the complexities of end-of-year payroll preparation and processing are best left to a team of qualified experts like the one at Exact Payroll. Please check out our full suite of payroll solutions, and contact us today with any questions that you might have about end-of-year payroll processing.
