December 2021 is almost here, and the rest of the year will gallop away before you know it. For a business owner, this is a busy time – a time to take stock of the entire year and get on top of pending payroll tasks. Inaccuracies and misses in payroll processing can quickly escalate into penalties, employee dissatisfaction, and wasted resources. It is why both small and large business owners prefer to get an early start on finishing their year-end payroll responsibilities.
9 Important Year-end Payroll Tasks
We have compiled a list of vital tasks you should add to your end-of-year payroll duties. Whether you run a large enterprise or a small business, completing these tasks in time will keep things going smoothly in 2022.
1. Confirm that employee information is accurate
At the year-end, it is necessary to verify all the employee details on your records. Personal details, designations, etc., for some of your staffers, may have changed. The fields you should verify include name, Social Security Number (SSN), present address, other contact information, and marital status.
2. Update records for contractor payments and handwritten checks
During the year, you may have issued handwritten checks to some of your employees on occasion. Have these been entered into your payroll system? Updating your records to reflect all the payments made during the year is essential to file your taxes correctly.
You should record voided checks and un-cashed checks. Using a paystub generator free can be helpful here. It lets you quickly record all the employee information and generate professional paystubs for them.
3. Account for fringe benefits
Many businesses offer Fringe benefits to their employees like stocks, cars, etc. It is crucial to add these benefits under an employee’s earnings throughout the year. Verifying this information should be a part of your end-of-year payroll tasks so that any earnings do not go unaccounted for.
4. Factor in any bonuses you paid
Did you pay bonuses to your employees during the year? If so, you will have to update your payroll records to reflect this information. If you have been adding a bonus to the regular payment, it will get taxed at the usual rate. But any pay you issue separately will get taxed at a standard rate of 22%. If you build a paystub online using a tool like StubCheck.com, you can use an enhanced template to cover bonuses, overtime pay, vacation pay, etc.
5. File form 941 for your business
Preparing for your taxes is perhaps the most significant task in your end-of-year payroll list. At the year-end, you must figure out your Form 941 to report your FICA taxes, including income taxes, Medicare, Social Security tax, etc. This form gets filed quarterly. Adding it to your December checklist will help you stay on top of your taxes.
6. File W-2 and 1099 forms for full- and part-time employees
You need to file W-2 forms for your full-time employees for whom you have withheld taxes through the year. For your contractors, if any, you must file 1099 forms. After filing these documents, you will have to share copies with your employees and contractors. Deciding to use an online paystub generator likeStubCheck.com can be a time-saving option. Here, you can access the latest W-2 and 1099 forms. The background calculator and updated tax guidelines allow you to cut costs and time while completing an otherwise cumbersome task.
7. Check payment schedule for bank holidays
Will any of your paychecks be affected by a bank holiday? If you pay your employees by direct deposit and a payday falls on a bank holiday, they will not receive their payment on time. It is best to examine your payment schedule before a brand new year commences. You can then inform your staff that they will get paid one day in advance in these cases. A Free check stub maker or financial software can help you create a schedule to disburse payment and issue payslips on time.
8. File your Affordable Care Act report (ACA)
The ACA has now mandated reporting on health coverage for businesses with more than 50 employees. You have to file a 1095-C form to prove that you provided health coverage to your staff. If you run a small, self-insured business, you will file a 1095-B form.
9. Review tax rates for 2022
Finally, in preparation for the year to come, you should review all the tax rates. These are liable to change annually, making it critical to stay updated and avoid errors in filing taxes. The rates you have to verify are FICA, federal income tax, and federal and state unemployment taxes. While you are at it, you can also review state-specific taxes and state/local income tax.
Completing all your pending payroll tasks well in time permits you to go into the New Year peacefully. It is also helpful to establish clear guidelines for 2022 at this stage, including dates for filing your taxes and reports due to the IRS. Employing a digital tool or software application to assist you can ease the load of your finance and HR teams. It also reduces the chances of errors and elapsed deadlines. It also reduces the chances of errors, thereby avoiding penalties, missed targets, and other roadblocks to running a smooth business.