Fourth quarter is a busy time in the payroll world. Pair this with the hustle and bustle of the holiday season, and you can understand why mistakes happen at year-end. However, with a little planning and this handy checklist, you can ensure a smooth, stress-free transition into the year ahead.
Before processing your last payroll of the calendar year, complete the below checklist. While this list is extensive, you’ll also want to add any items that are unique to your business.
Year-end payroll checklist:
- Review your reports from the previous year-end to account for unique adjustments that you need to repeat this year.
- Preschedule bonus and adjustment runs as soon as possible to ensure they are included in your payroll run.
- Check with your accounting and/or HR department to determine whether you should include any taxable payments that were processed through accounts payable as part of an employee’s taxable wages (i.e., tuition reimbursements, health club dues).
- Check if you have any terminated employees with required adjustments so that you can account for this information. Remember, you may need to gross up adjustments to cover employee portions of Social Security and Medicare taxes.
- Verify that you accounted for all voided and manual checks.
- Contact your third party sick-pay administrator to obtain final benefit amounts and determine who will handle the W-2s for these payments (you/your payroll provider or the third-party provider).
- Determine where you will save or store undeliverable W-2 forms.
- If you haven’t done so throughout the year, report additional wage adjustments on the W-2s. For more information on taxable fringe benefits, review the Employer’s Tax Guide to Fringe Benefits (IRS Publication 15-B).
- Before issuing W-2s and 1099s, ensure all employee identifying information (i.e., employee records, names, Social Security numbers, and addresses) is correct. If you fail to do so, you may need to file a Corrected Wage and Tax Statement (Form W-2c).
- Confirm all 1099 employees have an identification number, as this is required for you to file 1099s with the IRS.
- Determine if you have employees that were “active participants” in a qualified pension plan during the 2020 tax year. If so, the Social Security Administration (SSA) requires that they check box 13. Review pages 22 and 30 of the IRS instructions for more information.
- If you haven’t updated your federal and state labor law posters, order and post them in an area visible to all employees.
- Make note of postal delivery schedules to avoid unexpected delays during the holiday season.
Editor's note: This article was updated from Nov. 19, 2018, to reflect the most recent information for 2020 year-end.