As the end of the year draws near, now is the time to begin end-of-year payroll preparation, including a few tasks that lie outside of the traditional payroll process. During this time, it is especially imperative to ensure compliance with regulations and accuracy in financial records to allow for a seamless transition into the upcoming fiscal year. While this may seem daunting, there are strategies to follow to streamline the process.
Due Diligence
First things first, it is imperative to ensure the accuracy of all employee information and data, which will act as the foundation of everything that follows. This involves reviewing and updating employee records to reflect current addresses, names, and tax withholding forms, such as the W-4.
Consider if employees should indicate “retirement plan” on their W-2 and confirm that all names and Social Security numbers are in the correct format to avoid penalties. You will also want to ensure that deceased employees are properly coded.
You’ll also want to confirm that all wages, bonuses, benefits, and deductions are correctly recorded. Review timesheets, paid time off, and any accrued or unused leaves to reconcile discrepancies and ensure precise calculations.
If your company offers year-end bonuses or benefits, allocate ample time to process these payments, and include these earnings in payroll calculations and ensure proper taxation in compliance with local laws.
Verify that all necessary tax documents, such as W-2s or 1099s, are prepared accurately for each employee or contractor. Stay abreast of changes in tax laws or compliance requirements to avoid penalties or legal issues.
Reporting
Now, you can create comprehensive year-end reports summarizing payroll data for the entire fiscal year, including summaries of wages, taxes, benefits, and deductions for better insights into the company's financial standing. Be sure to leverage software or platforms to streamline and automate the process to reduce errors and save time.
Preparation and Planning
Utilize this time to plan for the upcoming year by reviewing payroll processes for inefficiencies or outdated steps. Refresh yourself on changes in regulatory information impacting payroll management for the new year.
You may also consider preparing for potential audits by compiling and organizing payroll documentation, such as pay stubs, tax filings, and employee records, in a secure place. This preparation ensures a smooth process should an audit be necessary.
Communication
Be transparent with your employees about any changes that may impact them, including in payroll processes, tax regulations, or benefits, and allow them to come to you should they have any concerns or questions regarding their year-end earnings or tax documents.
Professional Assistance
If navigating year-end payroll complexities seems overwhelming, seek guidance from experienced professionals. The Baldwin CPAs Elevate team is here to help take the burden of payroll off your plate. Contact our team today with any questions you may have.