Preparing for Year-End from an HR and Payroll Perspective

end of year human resources tax compliance

As the end of the year quickly approaches, many payroll and HR departments feel a sense of urgency to meet certain deadlines. With a little planning and communication with employees, the stress level can ease significantly.

If you are currently outsourcing your payroll, you will only need to focus on the following four steps. If you process your payroll in-house, you will also need to address the second section of this article.

1. Review Employee Contact Information

Make sure employee names, addresses, and social security numbers are up-to-date. Since most W-2s are mailed to the employee, it is important to have the correct address on file. Send out reminders to employees asking them to confirm this information before the last payroll of the year. Depending on your payroll solution, if employee self-service is included, this simple task can be performed by the employee at any time using an online portal.

Some payroll solutions also identify missing or invalid employee data which ensure data integrity and eliminate unnecessary headaches.

2. Address How W-2 Reprints Will be Handled

Some companies charge a fee to the employee for a duplicate W-2. If this is the case, inform your employees of this fee so that they will be more cautious in storing the original document. However, with employee self-service, employees can access their W-2 electronically at no charge and without inconveniencing the payroll department.

3. Verify All Manual or Voided Checks Have Been Processed

Sometimes checks will be issued to employees outside of the payroll system. It is important that these checks are recorded and the tax liability paid prior the the start of the new year. Likewise, any checks that have been voided will also need to be recorded.

4. Gather Year-End W-2 Adjustment Information

Adjustments such as excess group term life, third-party sick pay, taxable fringe benefits, and COBRA assistance credits need to be processed no later than your last payroll of the year. Other W-2 items that do not have a direct payroll tax implication, such as two percent S-Corp health insurance or reimbursable moving expenses, can be added to the W-2 after the final payroll.

Not currently outsourcing? Continue with the following tasks:

  • Order W-2 & 1099 forms
  • Print and distribute W-2 & 1099 forms
  • Create a checklist of due dates for federal quarterly and annual tax returns
  • Create a checklist of due dates for each state’s quarterly and annual tax returns
  • Order state annual reconciliation forms
  • Reconcile Forms W-2 to Forms 941 for the year
  • Verify that pension plans are being reported correctly on Form W-2
  • Install new federal and state tax tables
  • Archive prior year payroll files

One final note, make a list of what you did this year and what you forgot to do and use this list as a reference to prepare for next year’s year-end.

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