Refer to this handy payroll checklist to prepare for the many steps you'll have to take to close the books on compensation, taxes and benefits.
When the holidays roll around and businesses celebrate with parties and time off, one group of employees seldom gets a reprieve: HR.
The end of a calendar year means HR goes into overdrive, ensuring payroll and tax obligations are met and initiatives for the upcoming year are ready to go. To make this an efficient and cheerful time of year, rather than a stressful and glum one, here's a year-end payroll checklist that should hopefully make the process less arduous — if you start preparing now.
1. Communicate With Other Departments
The surest way to guarantee everyone is on the same page is to communicate with the many departments that touch payroll processing. Coordinate your year-end initiatives with IT, finance and other departments so that no stone is left unturned.
2. Install the Latest Software Updates
You don't want to start performing year-end tasks only to learn your payroll software should have been updated months ago. Install the latest updates. It also wouldn't hurt to run a test year-end process so you can identify and correct any errors.
3. Get Employee Social Security Information in Order
Prior to preparing W-2 forms, check with the Social Security Administration to align employee names and addresses with Social Security Numbers.
4. Don't Forget Contractors' Pertinent Information
All income over $600 that's paid to contractors must be reported to the IRS. Verify all of your contractors' pertinent information, including their tax ID numbers, before mailing 1099 forms.
5. Focus on the Year at Hand
Double-check if employee wages are recorded in the year that is about to end by referring to the paycheck date. Remember, the earned wages of December 2017 that were paid in January 2018 count as income in the current year.
6. Inform Employees About Unused and Expiring Benefits
As soon as possible, remind employees of any unused benefits that won't roll over into the next year. Vacation days, sick time and personal leave that expire by year's end should be used. Reminding employees now will help them properly schedule time off without disturbing production.
7. Don't Forget all Taxable Items
Determine the taxability of items such as deferred compensation, fringe benefits, long-term disability, third-party sick pay and group term life insurance.
8. Clear All Outstanding Checks
Process all manual and voided checks. Any employee checks issued outside of your regular payroll process must be recorded, and you must pay their tax liabilities before 2019. Similarly, all voided checks should be recorded.
9. Set Employee Compensation for 2019
In all likelihood, some of your employees will deserve pay raises next year. Determine how much you can pay them by calculating the cost of compensation and payroll taxes. Also, 10 states — including California Massachusetts and New York — are raising minimum wages in 2019, according to the National Conference of State Legislatures, which has a complete list of states enacting wage increases next year and in the near future.
10. Sign Up Employees for New Insurance Plans
One last thing: Although the process of enrollment isn't directly related to payroll, the payment of business-offered insurance plans obviously will affect payroll. Ensure employees are signed up for health and other insurance plans, and be ready to explain any changes in benefits. Also, inform employees they can change the contributing amounts of their 401(k) plans.
Of course, this payroll checklist doesn't cover all of the steps you'll need to take have a smooth year-end payroll process, but it should be a start in the right direction. Your organization can also outsource payroll and tax compliance so you can focus on more strategic initiatives — and also enjoy the holiday parties with less stress.