The end of the annual year brings a close to payroll for 2018. Employers should issue W-2 forms and 1095-C forms (if applicable) no later than January 31, 2019. Closing out the year involves many small tasks to make the start of next year’s payroll a breeze. Below is a list of important tasks to help employers wrap up the 2018 payroll year:
1. Check Employee Tax Deductions
Reach out to employees and remind them to check their current tax withholding deductions. Afterwards, increase or decrease deductions as needed. Let your employees know, now is the last chance to correct any errors or make last-minute updates. By the end of the year, there will be nothing more they can do and the employee will have to make corrections with their tax return.
2. Do An Information Audit
Audit your employee records and make sure that everyone’s information is accurate. Check for SSN numbers and updated mailing addresses. Ask your employees to verify that you have the correct social security number in your system. If anyone has left during the year, try to make sure you have a way to send them their W-2.
If possible, provide employees with the option to receive an electronic W-2. An electronic W-2 delivery streamlines your W-2 delivery process and ensures nobody fails to receive their tax forms. Check your state’s guidelines on specific laws for delivering W-2 forms.
3. Make Sure You Have Updated Federal & State Tax Forms
Make sure you have all your W-9 forms on file for your 1099 independent contractors and W-4 forms for your employees. While you should be collecting these forms prior to paying your contractors and employees, now is the time to do an audit and make sure you have one for each individual that has performed work for you throughout the year.
Also, double-check your state tax forms. Collect any outstanding state tax forms for all of your contractors and employees. Check your state’s specific guidelines for the full listing of required tax forms.
4.Check Non-Tax Related Deductions & Plans
Check any pensions, 401ks, flexible savings or health savings accounts, healthcare plans, or insurance deductions. Make sure all year-to-date amounts are correct. If there are errors, make adjustments.
5. Check That Social Security & Medicare Taxes Are Accurate
Check the employer and employee portions of Medicare and Social Security taxes to ensure accuracy. You should check both the employer portion and employee portion.
The employer portion of medicare is 1.45% and social security is 6.2% of total employee’s wages.
Additionally, employee percentages should be 1.45% for medicare and 6.2% for social security.
See this article from the IRS on additional details for medicare and social security withholding.
6. Check Employer Unemployment Deposits
Check employer unemployment deposits. Pay all amounts due for the final quarter. Additionally, make sure unemployment has not been paid beyond your state’s taxable wage limitation. Check with your states unemployment office for this limitation where applicable.
7. Check For New Rates
Check for any new rates to insurance (unemployment, disability…etc.) where applicable. Make sure to notify your payroll service of the new rates or update the rates as needed.
8. Make Sure Your Payroll Totals Match
For this you want to make sure of the following:
- Compare payroll register totals to Form W-3 totals and make sure there are no discrepancies.
- Check forms W-2 for the correct state and local tax report totals.
- Compare total wages reported for each tax. Make sure any differences are paid or reconciled.
- Check reported tax on Forms 941. Make sure they match total taxes and wages reported from Form W-3.
- Make sure all employee tips are properly recorded and taxed and that all totals match. (If applicable).
9. Update Deductions
Remove any employee taxes and/or taxable blocks that are outdated. Also, update any deductions or garnishments that are not desired for the new year. Also, make sure to document any tax changes. Store any deduction updates in your employee’s file.
10. Create A Payroll Schedule for 2019
Finally, schedule new year payroll dates, quarter closes, and all processes for 2019. Plan for any early pays based on holiday changes..etc. Additionally, make sure that any bonus pays are planned and scheduled in advance. Release this new schedule to your employees as well as a full listing of paid holidays or scheduled days you will be closed.