Payroll Checklist

2023 Year-End Payroll Services Checklist

As the holidays approach, one crucial task looms for businesses: year-end payroll. Regardless of your company’s size, navigating this process efficiently and accurately is vital. With so much happening both inside and outside of work during this period, staying organized is key. This year-end payroll checklist can help you stay on top of things and streamline the entire process, potentially making it a good time to consider the benefits of payroll services.

Understanding Year-End Payroll:

This process typically spans from fall, when you begin reviewing and verifying financial information in anticipation of the last payroll, to the first few months of the new year, concluding with corporate tax filing. During this time, you’ll handle tasks like:

  • Verifying business and employee information accuracy
  • Auditing employee payment records
  • Confirming Affordable Care Act (ACA) information
  • Setting bonuses and compensation for the new year
  • Identifying and informing employees about expiring unused benefits
  • Checking for eligible tax credits
  • Finalizing wages, taxes, and benefits for the year
  • Distributing W-2s to employees
  • Filing year-end payroll taxes and depositing owed amounts
  • Setting up your payroll plan for the coming year

Fortunately, several proactive steps can ensure a smooth process, and payroll services Australia can help automate many of these tasks, freeing up your valuable time and resources.

Year-End Payroll Checklist: Pre-Last Payroll Actions:

Several key steps before processing the final payroll of the year will set you up for success:

Verify Business and Employee Information:

Ensuring accurate information beforehand saves time and avoids corrections on tax forms like W-2s. Check quarterly tax forms to confirm business name, address, federal and state employer identification numbers (EINs), and state unemployment account numbers. Ask employees to verify their names, social security numbers, and addresses. For independent contractors requiring IRS 1099 forms, confirm their names and EINs. Compare this information with existing records to ensure they receive the correct tax documents.

Audit Employee Payment Records:

Review employee wage amounts, benefits deductions, child support, garnishments, and tax exemptions throughout the year for accuracy. Consider partnering with payroll services to ensure consistent and accurate record-keeping. You can also read about Navigating Payroll Outsourcing: Essential Considerations for Success by visiting

Verify ACA Information:

Reviewing ACA information ensures a smooth 1094-C form filing with the IRS. Consider a test filing to confirm the IRS can accept your filing beforehand, avoiding last-minute issues. Many payroll services offer ACA compliance support to simplify this process.

Set Up Bonuses and Compensation for the New Year:

If your company offers annual bonuses paid at year-end, ensure they are submitted for payment with correct amounts. Verify any state or local minimum wage increases and salary threshold changes affecting exempt employees while budgeting for the coming year. Payroll services can help manage these changes and ensure accurate calculations.

Identify and Notify Employees of Expiring Unused Benefits:

Your organization might offer various benefits, from paid time off to Flexible Spending Accounts (FSAs), with different usage timeframes. Identify benefits requiring payout by year-end based on company policy or applicable laws. Inform employees to submit final claims before year-end closure. Payroll services can often track and manage employee benefits, simplifying communication and administration.

Check for Eligible Tax Credits:

The Employee Retention Credit (ERC) is available for qualifying organizations under the CARES Act. This credit can be claimed retroactively. Deadlines for filing are April 15, 2024, for the 2020 tax year and April 15, 2025, for the 2021 tax year. Consider consulting with a payroll services provider to help navigate tax credits and ensure compliance. If you want to read about Australia’s Leading Payroll Training,
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Finalize Wages, Taxes, and Benefits:

Review and make any necessary changes to wages, taxes, and benefits for the current year. As you calculate summary numbers for year-end tax forms, remember to include benefits like tuition reimbursement, stock options, and paid time off in employee income. Payroll services can automate these calculations and ensure their accuracy.

Year-End Payroll Checklist: Post-Last Payroll Actions:
Having processed the final payroll, here are the final steps:

Distribute W-2s to Employees:

Once the last payroll is processed, begin distributing W-2 forms to employees. Regardless of the delivery method, ensure employees receive them by January 31st of the following year. Payroll services can often handle W-2 distribution electronically, saving you time and ensuring accuracy.