The year-end season is one of the busiest and most stressful times of the year for payroll professionals. All annual figures must be reconciled and prepared for end-of-year filing and reporting – these numbers drive employees’ W2 forms, so it is imperative that they are accurate. A successful payroll team understands that good preparation is key to a successful year-end season. Here are some tips to help the year-end process move along smoothly.
Start with a Plan
Planning out the different tasks that need to be completed will help keep the team on track and help ensure that no critical steps are missed. A good project plan should include the required tasks, when each item should be completed, and who is responsible for each item.
Validate Employees’ Information
Employees may have changed addresses during the year or may have had name changes or other updates. In some cases, there may be employees who were brought on board with a temporary tax identification number or a pending social security number that the employee and/or HR department may have forgotten to update. Addressing these before tax filings are actually due will save some headaches. If an employee self-service portal is available, having employees log in and verify that their information is correct is a great option. Common errors include misspelled names and incorrect addresses, which should be relatively simple to update in the system.
Communicate with Other Departments
Make sure all payments made to employees have been properly recorded and taxed. The last thing you want to hear after W-2s have been issued is that a special bonus was paid to an employee, or there were some fringe benefits that should be recorded for the year. Some common items requiring adjustment may include employees’ personal use of company vehicles, group life insurance in excess of $50,000 of coverage, and third-party sick pay. Clear and open communication is important so items impacting payroll can be processed and recorded in a timely manner. If possible, period check-ins with the HR and accounting teams can be helpful in catching these types of items before it’s too late.
Audit Year-to-Date Data
Payroll figures should be audited on a regular basis to ensure the correct numbers are being recorded, remitted, and filed. Quarterly audits that are done when completing quarterly filings of form 941 can help find any discrepancies early on. Balancing payroll figures each quarter also means there will be fewer items to look through if an issue is found in Q4. If your payroll system allows, a preliminary W-2 audit can be helpful for finding issues.
Review Pay and Deduction Codes
Year-end can be a good time to review the different pay and deduction codes to make sure they are set up to behave properly when it comes to taxes. The preliminary W-2 audit can be handy here to see whether pay and deduction amounts are being reported in the proper boxes with the appropriate coding.
Be Prepared for Last-Minute Adjustments
If any issues are found, they’ll need to be addressed and corrected before year-end reports are finalized. Otherwise, you run the risk of having to deal with amended filings and dreaded forms W-2c. Your company may also have items like holiday bonuses that may need to be paid out – many times these are processed separately from employees’ normal payroll and given to employees at a company event.
Start Early!
Year-end can be a hectic time for your team, especially with the added stress of the holidays. Getting a head start on preparations and audits can make for a smooth and worry-free year-end season for you, your team, and your employees. Better yet, work with a partner who has the experience and expertise. Valor Payroll Solutions can help you focus on your core business and take the stress out of payroll and year-end payroll reporting and compliance. Contact us today!
