Quarter four can be a stressful time of year for businesses. A particularly stressful quarter four responsibility is dealing with year-end payroll procedures. Here at Launchways, we understand year-end payroll procedures can be complex and time-consuming. That’s why we decided to put together a simplified payroll checklist to help you tackle year-end payroll like a pro.
Year-End Payroll Checklist*
1. Check employee and employer data:
- Verify the employer and employee data that is used in processing your quarterly tax reports and W-2s. view the “Quarterly Tax Verification Letter” is the document which displays this critical data.
- To which employees does the “retirement plan” indicator in Box 13 of Form W-2 apply?
- Confirm that employee names and Social Security numbers are in the correct format.
2. Check wage, tax and benefits data:
- Confirm that deferred compensation plan type is correct and verify employee contribution amounts.
- Check that Group-Term Life Insurance adjustments have been updated and submitted.
- Ensure that other special tax items have been updated and submitted, such as Other Compensation, Third-Party Sick Pay, Employee Business Expense Reimbursements, Taxable Fringe Benefits, Tip Allocation information, and Dependent Care Benefits.
- Verify the employer state unemployment insurance tax rate and taxable wage limit for each state.
- Compute uncollected Social Security and Medicare taxes for retirees and former employees.
- Verify that withholding has been made properly, or withhold from the final paycheck for taxable fringe benefits. These may include:
- Group-term life insurance in excess of $50,000
- Third-party sick pay (is the third party issuing a W-2?)
- Personal use of company vehicle
- Non-qualified moving expense reimbursements
- Company-provided transportation or parking
- Employer-paid education not related to the employee’s job
- Non-accountable business expense reimbursements or allowances
- Non-cash payments
3. Check for special procedures:
- Schedule any special bonus payrolls for the current year.
- Request any special reports needed for year end.
- Ensure adequate payroll supplies to complete the year and to begin the new year, including blank checks, payroll forms and blank Forms W-2.
- Determine whether all adjustments are applied or that an adjustment payroll has been scheduled.
- Remind employees to fill out a new Form W-4 if their situation has changed.
- Obtain new Forms W-5 for Advance Earned Income Credit (EIC) for the new year.
- Confirm that all “manual” checks written during the year have been accounted for and updated in the system.
- Determine that all voided or reversed paychecks have been accounted for in the system.
*Please note: this checklist is meant to provide basic guidelines only. Payroll procedures and requirements will vary business to business.
Looking for extra payroll support? Launchways is here to help. Connect with a Launchways team member today to learn more about our payroll outsourcing solutions.