Minor errors are common in the Year-End payroll process, but small neglected mistakes can add up to a large penalty. This article will provide you with everything you’ll have a proactive and economical approach to tackle year-end payroll.
1. Update Employee Contact Data
Audit your employee information to verify you are not missing necessary Form W-2 data like whole Social Security numbers, names, and addresses.
To avoid fines review employee data:
- Check employee names are entered correctly
- Ensure correctness of employee addresses
- Confirm accuracy of employee Social Security number
2. Plan for ACA Annual Reporting
Before beginning work on annual reporting determine if you had 50 or more full-time and full-time equivalent staff within previous year.
- 50 or More Employees: Complete and file Forms 1095-C and 1094-C.
- Less Than 50 Employees: Complete and file Forms 1095-B and 1094-B.
- Less Than 50 Employees: Insurer is answerable for filing on behalf of the employer.
- Less Than 50 Employees: Reporting is not needed.
3. PROCESS ALL YEAR-END W-2 ADJUSTMENTS
Before preparing the last payroll of the year, verify all non-cash and cash income has been recorded and taxed properly. Another common Year-End arrangement is employer-paid health insurance for subchapter S shareholders who own a minimum of 2% of the company. It is simple to regulate a W-2 record to reflect this amount. But it is best to incorporate it with a payroll run, so it is listed on the applicable quarterly and yearly payroll tax returns.
4. CHECK FOR EXCESS RETIREMENT CONTRIBUTIONS
Contributions 401(k), 403(b), or SIMPLE retirement plans cannot exceed IRS limits. These are estimated limits and can be changed, so make sure to check yearly for the limits put out by the IRS.
5. PROCESS ALL MANUAL AND VOIDED CHECKS
Any employee payments issued outside customary finance measures must be recorded, and tax liabilities are paid before due dates. Some paychecks cut throughout the year may not have been cashed. Such checks should not be voided in the payroll system but should be viewed as an unclaimed property and reported to the appropriate state agency.
6. PROCESS FINAL PAYROLL FOR THE YEAR
If you are giving rewards and retaining retirement cuts, ensure the allowance doesn't pass the annual limit. Bonuses must be processed before the end of the year so tax payments are made on time to sidestep penalties.
7. PROCESS QUARTER-END AND YEAR-END REPORTS
Close the quarter and file the Employer’s Quarterly Federal Tax Return by the required due date to report payroll taxes and employee wages. Form 941 is typically due by the last day of the month following the end of the quarter. If you are giving rewards and retaining retirement cuts, ensure the allowance doesn't pass the annual limit. Bonuses must be processed before the end of the year so tax payments are made on time to sidestep penalties.
Takeaway
Payroll Year-End ought not to cause nervousness - with the correct arrangement - handling can be done effortlessly. You can put preparations in place for the new tax year.
If you are in the process of preparing for payroll year-end and need support, we can assist you in processing Year-End Payroll. Contact us for more details.
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