Payroll Year End (Quick) Checklist

Before the Last Payroll of the Calendar Year

• Verify Business Information
  • Confirm your Employer Identification Number (EIN) and state unemployment account numbers.
  • Ensure company details (name, address) are up to date.
• Review Compensation for Next Year
  • Consider expected pay raises, minimum wage increases, and salary adjustments.
  • Verify compliance with wage base for Social Security (2025 is $176,100) and minimum wage changes by state and locality.
• Review Bonuses
  • Determine when to deduct bonuses based on your accounting method (cash-basis vs. accrual-basis).
  • Ensure bonuses are categorized as discretionary or nondiscretionary and check impact on overtime pay for nonexempt employees.
• Inform Employees About Unused Benefits
  • Notify employees of vacation, sick leave, and personal time off policies. Advise on expiration or carryover limits.
  • Address Flexible Spending Accounts (FSAs) and the "use-it-or-lose-it" policy or grace periods.
• Confirm Employees’ Identifying Information
  • Ask employees to verify their name, Social Security number, address, and contact information to avoid errors on W-2s.
• Record All Processed Paychecks
  • Review and confirm all paychecks, deductions, benefits, and tax exemptions are recorded properly.
• Check for Potential Tax Credits
  • Review eligibility for the Employee Retention Tax Credit (ERTC) for businesses that kept workers employed during the pandemic.
• Order Year-End Tax Forms (W-2, W-3)
  • Ensure you order and prepare necessary tax forms early for timely distribution.
• Determine Payroll Policies for the New Year
  • Consider changes such as pay-on-demand options, updated pay schedules, or different payroll structures.
• Check for Special Circumstances
  • Address any issues with new hires, voided checks, or unresolved payroll disputes before year-end.

After the Last Payroll and Before the First Payroll of the New Year

• Finalize Wage, Tax, and Benefits Information
  • Confirm employee wages, taxes paid, and benefits for the year. Report any fringe benefits correctly.
• Distribute W-2 Forms to Employees
  • Ensure W-2 forms are delivered by January 31, with accurate information on wages, deductions, and benefits.
• File Year-End Payroll Tax Forms with the IRS
  • Submit payroll taxes, including federal and state filings. Be mindful of deadlines for payments, typically due by March 15 for most business structures.
• Review Next Year’s Payroll Schedule
  • Plan payroll for the upcoming year, considering any adjustments for holidays or weekends.
• Review State/Local Minimum Wage Changes
  • Stay up to date on minimum wage increases in your state or locality and adjust compensation accordingly for the new year.