Year-End Payroll Checklist: A Comprehensive Guide for CPA Firms and Payroll Service Providers

As payroll service bureaus and CPA firms gear up for year-end, it’s essential to ensure all tasks are handled efficiently and in compliance with tax regulations.  Year-end payroll tasks vary depending on each client’s specific needs and the many federal, state, and local tax requirements.

Here is a comprehensive year-end payroll checklist of the most common tasks these businesses must perform to ensure efficiency and compliance.

Essential Year-End Payroll Tasks

• W-2 Preparation: Generate and distribute W-2 forms to employees, detailing their annual earnings and tax withholdings.
• W-3 and W-2 Copy A Filing: File W-3 (Transmittal of Wage and Tax Statements) with the Social Security Administration (SSA) and provide Copy A of the W-2s to the SSA.
• 1099 Preparation: Prepare and distribute 1099 forms for any non-employee compensation, such as independent contractors. Starting in 2024, this could also include 1099-Rs for some deferred compensation employer contributions
• State and Local Tax Forms: Complete and file state and local tax forms, including state W-2 equivalents and unemployment forms.
• Quarterly (or monthly) Tax Reconciliation: Reconcile tax deposits and filings with annual totals, adjusting any discrepancies as needed.
• Payroll Reconciliation: Verify payroll data for accuracy and ensure compliance with payroll tax regulations.
• Year-End Reporting: Generate reports that summarize payroll data for the year, including payroll expenses, deductions, and other relevant information.
• Employee Benefit Reporting: Prepare reports on employee benefits, such as retirement plan contributions, health insurance, and other fringe benefits.
• Taxable Fringe Benefits: Calculate and report the value of taxable fringe benefits provided to employees during the year.
• State Unemployment Reports: File  state unemployment reports and confirm compliance with unemployment insurance requirements.
• Workers' Compensation Audits: Assist with annual workers' compensation audits to determine premium adjustments based on payroll data.
• Labor Law Compliance: Ensure payroll compliance with federal and state labor laws, including minimum wage, overtime, and employee classification regulations.
• ACA Reporting: Prepare and file Affordable Care Act (ACA) forms, such as 1095-C and 1095-B, for applicable large employers.
• Year-End Updates: Update payroll software and systems to reflect changes in tax laws, rates, or regulations for the upcoming year. IRIS Payroll updates systems to account for new state minimum wages, SUTA wage bases, Section 125 limits, and deferred compensation changes
• Records Retention: Advise clients on record retention requirements and assist in maintaining records in compliance with legal mandates.
• Tax Document Distribution: Assist in distributing tax-related documents, such as W-2s, 1099s and 1095-C forms for healthcare coverage.
• Account Reconciliation: Reconcile payroll-related accounts, such as payroll tax liabilities, to ensure they match year-end financial statements.
• Year-End Employee Communication: Provide employees with guidance on -tax-related matters, such as how to interpret their W-2 forms and make necessary updates to their tax withholdings for the new year.
• Tax Credits: Identify and apply for applicable tax credits, including the  Work Opportunity Tax Credits (WOTC).
• Payroll Audits: Conducti internal audits of payroll data to identify and rectify discrepancies or errors.
• Consultation: Offer expert advice and support to employer clients on year-end payroll tax strategies and planning for the upcoming year.

Staying Compliant and Prepared for Year-End

Mastering year-end payroll tasks is critical for accounting firms and payroll service providers. To assist you further, download our comprehensive resource, Mastering Year-End Payroll: A Guide for 2024. This guide covers everything from IRS filing deadlines and required forms to expert tips and best practices for year-end success. By following this guide, you’ll gain a solid understanding of the entire year-end payroll process and be equipped to handle it efficiently for your clients.