Checklists, Procedures and Ideas for Kicking Off Your Year Right
It’s the most wonderful time of the year, unless you’re stuck calculating and processing mismanaged, disorganized year-end payroll! As your payroll department is closing out the year, you might be asking yourself why you feel so behind at such a busy, festive time of year. The answer is simple. You aren’t working effectively throughout the year, collecting all the information from accounts payable that you’ll need for year end. Humbug!
Hear ye, hear ye, payroll and human resources professionals: You can’t possibly save all your year-end payroll processing for December and expect things to run smoothly. Let this be the year that you learn the latest best practices to help your payroll department transition from a stressful year-end crunch to a smooth and compliant year-end process. The steps you take now will reap big rewards when next December rolls around.
Making a List, Checking It Twice
While it takes a whole year to prepare to have an efficient year-end process in place, there are some things you can do now to make the transition to the new year a little less hectic. As you gear up to print those final paychecks for the year, you’ve got one last chance to make sure all distributions were properly categorized and taxed. In doing so, don’t overlook double-checking these details:
- Verify all employee data. Make sure you have the correct spelling for full names, addresses and social security numbers for anyone you will send a W-2 or 1099.
- Get all year-end W-2 adjustments in place. For example, calculate the proper taxation for fringe benefits for the year end including awards and prizes, moving expenses, personal use of company cars, and gift certificates.
- Make a checklist! As you close out the quarter and the calendar year you’ll simultaneously continue to prepare payroll for the new year. Keeping track of filing dates is critical as you prepare to file Form 941 (Employer’s Quarterly Federal Tax Return), and to mail or electronically deliver W-2s and 1099s.
As you seek to smooth out the year-end payroll processing and relieve year-end stress for both the payroll and human resources departments, stay on top of these crucial details:
- Your duplicate W-2 request form and procedures should be set up and in place in advance of issuing the forms. Doing so will assist you when processing those requests in the upcoming year.
- You need to know how to collect information from accounts payable throughout the year instead of trying to obtain all of the information in December. (You’ll have more time to actually attend those holiday festivities!) Get off to a good start in January.
- Use the required year-end notice to your advantage and update employees of what lies ahead for the upcoming year. (A simple two-page memo can prevent dozens of employee questions.)
- Stay up to date on late-breaking legislation/regulation changes that may result from the new administration or congressional action.
Newsflash: Your year-end preparations should begin well before the end of the year. Get a jump start in January and stay on top of your payroll practices on a month-to-month basis. This is especially important now, as the IRS is looking at year-end compliance issues. In fact, the IRS expects that you are gathering, calculating and reconciling W-2 data all year long.
The Regulatory Landscape
Keeping up with payroll best practices also means staying abreast of regulatory changes. Are you aware of the changes to Form W-2 for the current year, or the possible changes to Form 941 for the coming one? How about the latest update on white-collar exemptions? As you gear up to process payroll in the new year, you will need to be up on annual changes for social security wage base, fringe benefit limitations, federal per diem allowance, standard mileage rate, and qualified transportation fringe benefits. Let’s not forget state regulatory changes affecting payroll including state unemployment insurance wage bases and minimum wage increases.
It’s a lot to digest, and it’s why you need to learn best practices now to prepare you for smoother payroll processing in the year and beyond.
(This post first appeared in a ProfEd blog)
By Amy P on 11th December 2017