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Tips for a Successful Payroll Year-End: Frequently Asked Questions

December and January are very busy months for payroll processing. As one year ends and the new year begins, several payroll-related tasks need to be accomplished by employers.

 What do I need to do before my last payroll of the year?

  • Confirm accuracy of current employee data. Employee names, addresses and Social Security numbers are required on form W-2 and must be updated prior to the final payroll processing for the year.
  • Check employer identification numbers (known as EIN or FEIN) for accuracy.
  • Schedule any special or bonus payrolls in advance.
  • Record all year-end adjustments in the payroll.
  • Review federal holiday schedules and adjust your payroll date(s) as necessary.
  • Verify that proper withholdings for taxable fringe benefits.

What do I need to do after my last payroll of the year, but before the first payroll of the new year?

  •  Inform employees of the need to complete a new Form W-4 if their taxing situation has changed or if they are claiming exemption from federal withholding in 2012. Some employees may also need to complete a state Form W-4 if they claim differently for federal versus state withholdings.
  • Make any necessary changes to employee deductions for benefits such as medical, dental, 401(k), life insurance, etc.
  • Remove  any extra taxing or blocked taxes that are no longer desired.

It is also recommended that you verify your state unemployment tax rate as soon as possible, but no later than the end of the first quarter in the new year. In the last few years, state unemployment tax rates have changed dramatically in some states. Be sure to check with your state to ensure that you are calculating this tax at the appropriate rate for 2012.

My pay period end date is December 27, 2013. My pay period check date is January 3, 2014. In what year do I include these wages on Form W-2?

Wages are reportable in the year in which they are actually received (e.g. check date of January 3, 2014). Therefore, these wages should appear on Form W-2 for the 2014 tax year.

When do I need to mail Form W-2 to my employees?

By federal law, all Forms W-2 must be hand delivered or postmarked on or before January 31 of each year for the previous year’s data.

An employee has requested a duplicate copy of his W-2. Do I need to create a new one?

If an employee’s Form W-2 has been lost, destroyed or misplaced, you may make a copy of that employee’s W-2 from your employer reference copy. Type “Reissued Statement” at the top before presenting it to the employee.

I have a worker who is an independent contractor, not an employee. Do I need to issue a Form 1099 to this worker?

Earnings of $600.00 or more must be reported to the IRS through Form 1099 for all nonemployees. Earnings less than $600.00 are not required to be reported.

BenefitMall is pleased to provide additional information designed to make your payroll year-end easy and painless. Please follow our Business Blog to read our three-part year-end series where we outline in detail W-2 information verification, bonus payrolls and third party sick pay and how a little planning can make your payroll year end run smoothly.

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