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From holiday staffing to closing out the end-of-year books to spending time with family, December and January can be full of distractions for many small business owners.
To help you focus, we’ve put together a detailed year-end payroll checklist that should make it easy to stay organized and keep you payroll and HR compliant for the new year. Here are the to-do’s employers need to get done to start next year on the right foot, avoid mistakes, and maybe even spend more quality time with loved ones!
Year-end payroll and HR checklist
Complete payroll entries by year end
Whether you use payroll software or a ledger, it’s important to make sure the books are accurate before you close them for the year. If you’re using payroll software to file your taxes automatically, ensure that all contractor payments, W-2 earnings, and bonuses are completed prior to December 31, 2024 to ensure that tax payments can be made on time. Any adjustments or new entries after December 31 could put you on the hook for penalties and interest from the IRS and the state.
Review workers’ W-2 and 1099 information
The information that will appear on your workers’ year-end forms depends on the accuracy of your year-to-date payroll data, so it’s important to get it right. The Social Security Number Verification Service is a good resource for verifying employee IDs, and your payroll provider will usually allow you to run a report with all the relevant information. These reports are usually called something like an “Employee Summary” or “W-2 Preview” though it depends on the vendor. Take the time to review and update all information, including current mailing addresses and phone numbers for all employees and contractors you’ve paid this year, even if they’ve left the company.
Record employer health care contributions
Has your business paid all or a portion of any employee health insurance premiums throughout the year? If so, that data needs to be reported on each employee’s W-2, along with any premiums that the employee has paid toward a company-provided plan.
Contact your health insurance provider and request a document listing the total employee and employer contributions to healthcare for the current year. Even if the year is not over, your provider will have this information.
Record third-party sick pay
Third-party sick pay includes any insurance payments received by an employee through an insurance company and is considered earned income for the employee. The insurance company will provide a notice that details what should be added to the employee’s income. You’ll need to update this information no later than December 31st to ensure everything reflects accurately on the W-2s.
Account for fringe benefits
Services like personal use of company cars, gift cards, and gym memberships are taxable. Ensure that entries which document any fringe benefits received are made to an employee’s payroll history. For more information on taxable fringe benefits, please refer to IRS Publication 15-B.
Review federal and state law changes that may impact your business
A number of states across the US have payroll-related changes that will take effect in 2024. These changes include minimum wage changes, updated state unemployment wage bases, and new paid sick or family leave laws.
Order new compliance posters
If you have at least one employee, you’re required to post up-to-date state and federal employment law notices in full view, and in an area frequented by all employees. Failure to display the correct state and federal employment law notices can result in penalties, fines and lawsuits. With all the changes states have recently made, it’s a good idea to order new posters for your office every year.
Ensure all bonus payroll entries are submitted with enough time before year end
If you need to submit bonus pay runs before year end, allow enough time for them to process in 2024. Depending on the amount, bonus pay runs often require extra time due to IRS Next-Day Rules and pre-approved direct deposit limits. If it helps, we have a bonus pay calculator here.
Postmark year-end forms by January 31st, 2025
If you mail your W-2’s and 1099’s yourself, please note that they must be postmarked no later than 1/31/25. If you provide copies to employees in-person, digitally, or by another method, you must provide these forms no later than 1/31/25.
Want to learn more about how to simplify year end with accurate payroll and HR? Check out OnPay, or see a full list of the payroll services we offer.
Please note all material in this article is for educational purposes only and does not constitute tax or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.
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Jacob Thomas is the Marketing and Technical Writer for OnPay. He has more than 10 years experience in writing about and teaching technology. He lives and works in his hometown of Atlanta.