As the calendar year draws to a close, business owners and human resource teams find themselves immersed in the complexities of year-end payroll processing. Navigating this crucial aspect of business management requires careful attention to detail, compliance with regulations and strategic planning. Below, we’ll walk you through the key steps and considerations to make your year-end payroll process seamless.

1. Review and Update Employee Information

Begin the year-end payroll process by reviewing and updating employee information. Ensure all personal details, such as addresses, tax withholding forms (W-4) and other relevant information are accurate and up to date. Promptly address any discrepancies to prevent issues with tax filings.

2. Ensure Compliance with Tax Regulations

Tax laws and regulations are constantly evolving, so it’s vital to stay informed and ensure compliance. Confirm your business has complied with all federal, state and local tax obligations throughout the year. Verify your payroll system is updated to reflect any changes in tax rates, deductions and exemptions. This will help you avoid penalties and ensure your employees’ tax obligations are accurately calculated. Working with a tax advisor, like those at Doeren Mayhew, who specializes in your industry offers confidence you are in compliance and have the strategic tax planning to set your business up for success.

3. Review and Reconcile Payroll Records

Perform a thorough reconciliation of your payroll records for the year. Verify all earnings, deductions and taxes align with your financial records. This step helps identify and rectify any discrepancies before issuing W-2 forms to employees.

4. Calculate Year-End Bonuses and Other Benefits

If your business offers year-end bonuses or other benefits, ensure these calculations are accurate. To ensure transparency, communicate any changes or additions to employees. Additionally, consider the tax implications of these bonuses and benefits, ensuring they are appropriately taxed.

5. Prepare for W-2 Distribution

One of the most critical aspects of year-end payroll is the preparation and distribution of W-2 forms. Ensure all employee earnings are accurately reported on these forms. Make sure to provide W-2 forms to employees by the IRS deadline, typically by the end of January.

6. Prepare for 1099-MISC Reporting

If your business works with contractors or freelancers, prepare for 1099-MISC reporting. Verify you have accurate information for each contractor and ensure you meet the deadlines for filing 1099 forms with the IRS.

7. Communicate Any Changes to Employees

Keep your employees informed about any changes in payroll processes, payroll providers, tax regulations or benefits. Transparency fosters trust and helps employees understand how these changes impact their financial situations. Keep them informed about the timeline to receive their W-2 forms. Finally, consider conducting a year-end meeting or sending out a communication to address any questions or concerns.

8. Prepare for the Next Fiscal Year

As you wrap up the current calendar year, take proactive steps to prepare for the next one. Review your payroll processes, assess any challenges faced during the year-end process and implement improvements. Consider adopting new technologies, outsourcing specific services or streamlining procedures to enhance efficiency and accuracy. Stay informed about changes in tax laws and regulations that may impact payroll in the upcoming year.

Year-end payroll processing doesn’t need to be a daunting task. At DM Payroll Solutions, we help manage your W-2 and 1099 year-end reporting procedures – taking the pain out of payroll processing, so you can focus on your business. To learn more about how we can help you streamline your W-2 reporting and other year-end tasks, contact us today.

“Doeren Mayhew” is the brand name under which Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC and its subsidiary entities provide professional services. Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC (and its subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Doeren Mayhew Assurance is a licensed independent CPA firm that provides attest services to its clients, and Doeren Mayhew Advisors, LLC and its subsidiary entities provide tax and business consulting services to their clients. Doeren Mayhew Advisors, LLC, DM Payroll Solutions and their subsidiary entities are not licensed CPA firms.