As the end of the year approaches, now is a great time for businesses to get a jump start on year-end payroll processing.
Even if you use an outsourced payroll provider, there are some things that you can do to make the year-end processing more efficient.
The following are some items you should confirm and report before year-end:
- Confirm employee addresses, as some employees may have moved during the year.
- Confirm which employees are eligible for coverage under employer sponsored retirement plans since their eligibility must be reported on their annual Form W-2.
- Evaluate whether you have any employees for whom you provide life insurance benefits of greater than $50,000 face coverage. A calculation of income inclusion for the benefit value over $50,000 of face value coverage must be completed and included on the employee’s annual Form W-2.
- Plan to obtain confirmation of employee’s personal auto usage of company provided vehicles. A calculation of income inclusion must be done for these employees and included on their annual Form W-2.
- Confirm the amounts of health insurance premiums paid by the business for stockholder’s health insurance coverage. If the shareholder owns greater than 2 percent of the stock in the Company, these premiums must be reported on the Employee’s Form W-2.
- If your employees receive their payroll reports online, be sure to confirm all employees have verified access to their digital accounts. This includes both current and former employees who were terminated during the year. This proactive action will reduce the number of calls and emails you receive from people who lost or forgot their login and password information.
If you compensate subcontractors to whom you pay $600 or greater in the calendar
year, you will also have reporting requirements using Form 1099-NEC.
The following are some items you should complete before year-end:
- Obtain completed Form W-9’s for all subcontractors. This includes the individual’s, partnership’s or Limited Liability Company’s business name, address, and taxpayer identification number.
- If you prepare Forms 1099-NEC using QuickBooks software, be sure that the proper Vendor set-up has been completed to identify these subcontractors and their related expense classification.
Proactive steps in the next few weeks will alleviate bottlenecks for year-end payroll and subcontract tax reporting and will allow you to welcome in the New Year with fewer last-minute tasks to be completed.
