It’s that time of year! With year-end quickly approaching we wanted to provide you with a year-end checklist to ensure you have a smooth year-end. Please make sure to review each item listed below and whether it applies to your specific payroll needs.
Verify Employee W-2 Information
It is important that all employee data is reviewed and updated for changes that may have occurred throughout the year. You will need to continue to maintain all changes after verifying the employee W-2s through January 1st to ensure that any new updates are reflected correctly on the W-2. Please confirm the following information for each employee by December 31.
• Employee name (spelling)
• Employee Address
• Social Security Number
Enter Independent Contractor Information for Form 1099 Preparation
If you pay an individual (who is not an employee) or partnership for “services” rendered and the amount paid for the year is $600 or more, you must file an information return, Form 1099-MISC, with the IRS and provide a copy to the individual. Form 1099s are required to be filed and distributed by January 31. There is a penalty for failure to file by the date or failure to provide the correct identification number.
The IRS may charge a $100 penalty for each incorrect identification number.
If you have not previously entered your independent contractor(s) payments throughout the year you may either enter them in the payroll platform as a 1099 or complete and return the Independent Contractor Form 1099 Information form for your payroll team to enter. If we will be entering your Form 1099 information for your independent contractor(s), please complete and return with your last payroll to firstname.lastname@example.org.
Review & Provide Third-Party Sick Pay
Federal legislation requires the reporting of both taxable and non-taxable sick payments made to employees from a third party. Taxes withheld on those payments must also be reported. Sick pay should be included on either the employees’ W2s or on a separate form provided by the third party. If third party sick pay is not reported by the third party, it must be included on your employees’ W2s.
If any of your employees received temporary disability payments this year from a third party, such as an insurance company or state agency, the total amount of these payments must be reported. Most carriers provide third party sick pay statements throughout the year; please use those statements to report the information to SIMA no later than December 15.
Fringe Benefits are benefits provided by the employer to employees and are considered a form of compensation above their wages. Any taxable fringe benefits provided by your company need to be included in the employee’s pay as they are subject to taxes and must be reported on the employee’s W-2. Examples of fringe benefits include but are not limited to services such as personal use of company car, S-Corp Health Insurance (more than 2% owners), life insurance (in excess of $50,000), disability insurance, HSA employer contributions, other insurance, etc.
If your company utilizes SIMA’s accounting services then your accountant will coordinate collecting your company’s fringe benefits for your year-end payroll – please disregard the fringe benefits forms below. Otherwise, if your company will have year-end fringe benefits to include with your year-end payroll that you have not previously entered throughout the year, please work with your company’s Accounting firm (CPA) to complete and return the Year-End Fringe Benefits spreadsheet no later than December 15 to email@example.com.
Although you may process a bonus payroll at any time throughout the year, many companies choose to process bonuses at the end of the year. There are two ways to process a bonus payroll: (1) with your regular payroll or (2) as a special bonus payroll outside of your regular payroll. If you would like to surprise your employees with a year-end bonus, you may want to run a special bonus payroll after you run your regular payroll. By doing this, your normal payroll processing cycle will not be impacted (i.e., period ending dates and check date).
You should process any regular or special payrolls that include bonuses at least two additional days before your typical processing window. Additional processing time is required to allow enough time to debit and deposit tax amounts. Please reference Processing Year-End Bonuses and reach out to a member of our team if you need help processing a bonus payroll this year.
Send Updated State Unemployment Rate
Once you receive your updated State Unemployment Rate, please forward a copy of the notice to firstname.lastname@example.org for processing at least 1 week before your first payroll in January. We will then forward your company’s new rates to be updated in the payroll system.
Please keep in mind that these rates are effective January 1. If your rates are not updated then you will receive either a payment due to the state (including taxes and penalties) or refund from the state based on your company’s unemployment rate change after the first quarter.
You can download a printable checklist with all this information by clicking here.