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Are You Ready for the New Year?


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Making accurate and timely payments to employees is a payroll department’s number one goal throughout the year. However, what some people (especially those who have limited contact with payroll) may not know is that payroll plays an extremely critical function in the year-end process and adhering to the necessary federal and state reporting requirements. This makes December one of the busiest months of the year for any payroll department. Seasoned payroll professionals may have checklists or other resources to aid in making sure nothing is missed during this period. If this is your first year-end or if you simply need a refresher, here are a few helpful tips to help close out the year.

Are all workers classified properly (employee vs. independent contractor)?

Misclassified workers can result in costly tax liabilities. If your organization has any independent contractors, now is a good time to check whether you have a valid W-9 form for each payee, so the appropriate 1099 forms can be completed. And don’t forget, the IRS has a new 1099-NEC form that should be used for non-employee compensation.

Check wage and tax data

Most payroll systems out there are programmed to recognize and handle taxable wage limits and deductions correctly, but you may have a situation where taxable wages or certain deduction limits aren’t capped properly (this can be especially true if you switched payroll providers mid-year).

Some additional wage and tax data to verify include:

  • Taxable fringe benefits
  • Third-party sick pay
  • Other taxable items (non-cash payments, bonuses, etc.)

W2 mapping

Validate payroll items are mapped to the appropriate W2 box categories, especially if you have complex payrolls with a lot of different earning and deduction codes being used. This includes any applicable box 12 and box 14 items.

Confirm employees’ information in the system

The end of the year is also a great time to check that all employee data is up to date. Identifying missing or incorrect SSNs is critical, but you should also verify that other personal information (legal name, date of birth, etc.) is accurate. As remote work becomes more and more widely accepted, making sure that addresses are current is going to be extremely important – especially if an employee has moved to a different state and/or tax jurisdictions during the year.

 

Final year-end adjustments

During this process, you may find that there are some payroll adjustments that need to be made for the year. Be sure to get all adjustments made before the new year.

Prepare your systems for the new year

Payroll and tax regulations are constantly changing and with each new year, comes a new set of rules: tax tables, wage and deduction limits, updated forms, etc. You’ll want to make sure you have everything in place and your payroll system is equipped to handle any upcoming changes. Valor Payroll Solutions can help with your compliance and our employee self-service (ESS) makes it easy for employees to maintain and update their information electronically.

Questions? Contact us today – we’re here to help!

 

 

 

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