As 2022 comes to a close, it is crucial that your business has all the information needed to close out your books and get ready for 2023. Year end Payroll processing requires a variety of forms to be filled out and records submitted to the IRS. You will also need to provide all of your employees and contractors with forms stating exactly how much they were paid the previous year. This can be a daunting task, but if you were diligent with your record keeping throughout the year, it should be a piece of cake. And if you weren’t, this blog will help you get everything in order and get you set up for success!
Confirm Employee and Company Information
The first step to completing year end payroll is to make sure all your data is correct. Take a look through your payroll records and ensure that all of the information for your employees and contractors is correct. Double check that your company names, tax IDs, and all other relevant information is correct and up to date. Little errors in your paperwork could raise flags and lead to further issues down the road. Double checking and triple checking your data now is going to save you time and headaches down the road.
Verify Payments, Taxes, and Benefits
After you have verified all the employee and company data, the next step is to make sure your payments, taxes, and benefits are aligned with the payroll information you are submitting. This information is crucial to ensuring that your books are up to date and accurate. You will need to check worker status, PTO accrual, exemptions, pre tax wages, and final wages for all employees and contractors. This data is typically found on a W4 form. Employees have the ability to update their information with the government at any time and there are cases where they don’t update with the employer when making these changes.
Preparing Your W-2s
Most payroll companies will handle this for you, but if you process your payroll on your own, you will need to order the paper forms from the IRS. These forms take some time to arrive, so you will need to plan ahead to make sure you receive them with enough time to get them filled out and sent to your employees before the deadline. These forms can also be filled out online which will save you some time.
Manage Employee Benefits
Benefits are one of the most important things employers can offer to their employees. Making sure this information is up to date and properly kept is key to making sure your business is compliant and up to date at the end of the year. Whether employees accrue their PTO in a lump sum, or earn it throughout the year, you need to keep track of what has been used and how it will transfer into the next year. Each state has different mandates and laws about how employers handle PTO, so make sure you know what the rules are where your business is located and make sure you are handling it correctly.
Bonuses Need to Be Tracked
If your company is giving out bonuses, they need to be sent out before the end of the year. Bonuses are also taxes differently than normal payroll and employment taxes, so keeping a strong record is very important. Reporting bonuses varies depending on how your business handles the accounting, so be sure to check with your accountant to make sure your business is reporting properly.
Don’t forget to order your updated Labor Law Posters before the end of the year so you can remain complaint in the following calendar year. Federal law states that these posters need to be displayed in place where all of your employees can see them. If you fail to order and display these posters, you could face fines, fees, and potentially open your business up to lawsuits and labor disputes.
Update Payroll Data
It is important to make sure that you have all your data up to date for the start of Q1 of next year. Before you process your first payroll period of the year, you’re going to need to confirm a few things. You will need to check for any changes in wages, tax rates, deductions, and updates to any employee payroll information that may have changed since last year. You will also need to provide a payroll schedule to HR / employees so they can know when to expect their paychecks.
Distribute W-2s / 1099s
Once you have confirmed all the information is accurate, it is time to send out the W2s and 1099s to your employees and contractors. You are legally obligated to get these sent out before January 31 of the following year. These can be sent out in a physical form, or digitally. If they are being sent digitally, you will need to get consent from employees and contractors stating that they are aware that they will be receiving an electronic version instead of a traditional paper copy.
Make Sure You are ACA Compliant
The Affordable Care Act can be a tricky thing to navigate if you are not familiar with the ins and outs of what businesses need to do to remain compliant. The general understanding of the rules is that all companies who have over 50 full time employees are required to provide health insurance to their employees. So, if this applies to your business, make sure you have all the data handy and ready to file by the end of the year. For a deeper dive into this, read our blog here: ACA Compliance
Filing the Forms with the IRS
You will need to make sure that the IRS receives copies of all of the W2s and 1099s that your company sends out. These forms are due to the IRS by January 31. You may also need to file these forms with state and county agencies depending on where your business is located. Fir every W2, you will also need to submit a W3 form; this is a summary of all the information on the W2.
File the 940, 941, and 944
Don’t forget about paying fourth quarter Unemployment Taxes for this year with Form 940. You are also required to file federal income taxes and FICA using Form 941. Lastly, you are obligated to file Form 944, which is an annual return of all paid payroll taxes from this year. These forms are all due by January 31st.
We covered a lot of information in this blog and it can certainly be overwhelming for someone who is handling this all on their own. Here at Doyle, we work very hard to make sure all of this is handled for you so you don’t even have to think about it. We provide a full service scale of solutions that will ensure that you are ready to go at the end of the year.
If you have any questions or would like to discuss how we can help make sure everything is handled properly, we would love to hear from you and figure out a way we can help make sure everything goes smoothly. Our team of dedicated payroll experts are here to help and know what it takes to keep your business compliant and make sure there are no surprises along the way!