Sorting out your year-end payroll checklist towards the end of the year is a big deal and can feel like an enormous task. It’s a process that organizations must carry out at different times throughout the year, before impending deadlines put pressure on them to do so in the fourth quarter.
It is crucial to remember, however, that the actual method for closing out your payroll varies depending on your industry.
Continue reading to learn more about payroll and how it can influence your financial positions at the end of the year.
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How Does Year-end Payroll Work?
Businesses are obliged by law to go through the year-end payroll process, which includes federal, state, and local tax duties, employee wages, and bookkeeping. In summary, efficiently sorting out the year-end payroll is critical for organizations seeking to avoid tax fines, legal issues, and unbalanced books.
Here’s a checklist of the primary tasks you should include in your year-end payroll checklist.
1. Update & Complete All Payroll Data by year-end
You will need to update your payroll information before running your first paycheck of the new year. This involves checking for new tax rates, updating employee information, balancing PTO, and adjusting yearly deductions. You should also change your payroll schedule and communicate the information to the appropriate departments.
2. Keep Track of all Bonuses
Bonuses must be paid out with the final paycheck of the year if you are granting them. For tax purposes, you must keep track of any bonuses you give.
3. Perform Regular Policy & Employee Data Updates
You must guarantee that all of your company’s and workers’ information is up to date. That’s simple payroll best practices 101: know who you’re paying. Also, ensure that your company’s name, tax IDs, and tax details are all current and correct.
4. Double-Check Your Numbers
After you’ve double-checked and verified that all of your employee and company information is correct, the next step is to double-check that your wage, tax, and benefit figures line up with your payroll numbers.
5. Maintain a record of Third-Party Sick Pay.
Third-party sick pay covers any insurance payments provided to employees from an insurance company and can be classified as earnings for the employee. The insurance company may send a notification outlining what’s being deducted from the employee’s pay. To guarantee that everything is accurate, you should update this data early each year.
6. Record all Allowances & Employee Benefits
Personal usage of corporate vehicles, gift cards, and gym memberships are all taxable expenses. Ensure that records are made to an employee’s payroll history that reflect any fringe benefits received.
Payroll In The New Year
Your year-end payroll checklist does not finish with the start of the new year. Before you process the first paycheck of the new year, you must accomplish a few crucial activities.
Adjust & Update all Payroll Information
Check each employee’s remuneration before the first salaries of the new year are sent. This process is essential if you offer bonuses based on performance or if there have been changes to the minimum wage law in your region.
How to Ensure Smooth year-end payroll processing
Perhaps the most important part of year-end payroll processing is that it relies heavily on certain steps carried out regularly throughout the year. Here are the core practices you should follow to ensure a smooth year-end payroll process.
1. Maintain Accurate Records Throughout the Calendar Year
Payroll at the end of the year necessitates numerous processes of verification. Maintain precise records throughout the year to avoid having to recalculate and re-verify payments.
Ascertain that all of your workers are categorized accurately. You could also use time-tracking software to correctly track and report staff hours.
Ensure that you don’t wait until the end of the year to double-check your payroll data. Plan regular audits to ensure that your books are in order.
2. Payroll software can be very helpful.
Payroll software makes scheduling paychecks and maintaining precise records a breeze.
Look for payroll software that automates the scheduling of paychecks and the filing of tax forms.
Time-tracking and payroll software are also great tools for easing the burden of year-end payroll.
3. Create a Customized Year-end Payroll Checklist
You have a lot on your plate as a business owner. It’s difficult to have to restart your yearly payroll procedure every year.
Rather, make a year-end payroll checklist that you can refer to and complete each year. Include all needed processes as well as any elements that are specific to your company.*
Reapplying the same approach year after year saves time and guarantees that you satisfy all of your year-end payroll duties.
Whether you intend to process your payrolls yourself or you prefer to outsource, use our year-end payroll checklist to get started and keep your books in order. You can also check out our other articles on important HR duties and effective workplace management.