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6 Steps to Maintain Year-End Payroll Compliance

6 Steps to Maintain Year-End Payroll Compliance

The end of the year is usually a time when most departments wind down for a bit. However, payroll staff will tell you that it’s the most hectic time of the year in their department. With a variety of tax, compliance and reporting issues that need to be dealt with, the payroll department has their hands full.

Why is it so stressful? It’s not only busy, but there is the added stress that payroll mistakes and compliance issues can have serious consequences–from penalties to upset employees. That’s why it’s crucial for your payroll department to be on top of everything that needs to be done at the end of the year.

Here, we give you the steps you need to follow to make sure your year-end payroll is perfect and problem free.

Review Company and Personnel Information

Take time to verify that all information for your company is accurate and that all personal information for employees is up to date. That means checking that your company name, tax ID numbers, and company tax information are correct. For employees, you should check name spelling, their social security number, and their home address. Update any information that needs it to avoid any penalty that can be incurred due to inaccurate information.

Review Wages, Taxes, and Benefits

After updating all company and employee information, check that your wage, tax, and benefit numbers align with your payroll numbers. Information you need to verify includes yearly PTO accrual, worker status, filing status, number of exemptions, year-to-date wages and taxes, and pre-tax amounts. Since employees can change their tax information at any time, discrepancies aren’t uncommon.

Take Care of PTO

All companies have their own policies when it comes to unused PTO at the end of the year. Some pay employees out, some allow PTO to roll over while others allow PTO to accrue as the year progresses. Whatever your company policy for unused PTO, the end of the year is the time to review that and act accordingly. For example, if you pay out at the end of the year, you will need to ensure that the payment goes out with the last paycheck. 


Review Legal Changes

The new year often brings with it changes to any payroll or labor laws that directly affect you and your employees. Make sure to set aside time to research any new or updated state or federal laws that you will need to be compliant with starting in the new year. Some of these changes include employee or contractor classifications, minimum wage increases, or new tax rates that may impact withholding requirements. Finally, make sure your labor law posters that are legally required to be posted reflect any updates or changes. 

Order and Deliver your W-2s and 1099s

You are legally required to send out Wage and Tax Statements (W-2 forms) by January 31 each year. With delays in postal service, make sure you order your forms and have them delivered in plenty of time. All employees who have income, social security, or medicare taxes withheld must receive a W-2. Additionally, any contractor who is paid $600 or more is required to obtain a 1099 form. Both of these forms can either be mailed or sent electronically. 


File All Required Forms

Payroll may often feel like they’re drowning in paperwork at the end of the year, and there’s a good reason for that. Forms that you will need to make sure are filed by the deadline include:

  • W-2s and 1099s with the Social Security Administration
  • W-2s with your state or county if local tax laws require it
  • IRS Forms 940 and 941, which report your FICA and FUTA taxes for the quarter


Make these steps part of your routine at the end of every year, and you’ll ensure you are compliant with all state and federal laws that govern taxes and your employees. 

For more helpful payroll information like this, visit Complete Payroll’s blog. With hundreds of up-to-date articles about all things payroll, you’re sure to find the answer to your questions. 

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