Payroll and Employees – Getting Ready for Year End
It’s the most wonderful time of the year!
…Said no small business owner, ever. End of the year payroll tax form preparation can be a hassle, and juggling running your small business and ensuring accuracy of all your year end payroll employee’s information can be hectic. But the end of the year doesn’t have to be so stressful for your small business, as long as you’re organized and prepared!
So what exactly do you, as a small business owner, have to do in order to prepare for the end of the year? Here are a couple of things that every business owner should complete at this time of year, so that later there’s plenty of time to enjoy holiday cookies and pretending to like your in-laws!
Ensure that your payroll records are accurate – review the contact information from your employees (past and present! Don’t be a scrooge!) and make sure that you have all the current contact information and mailing addresses. That way, when you send out W-2 forms, they have a greater chance of arriving to their correct destination and on time – eliminating the frantic calls from employees in April who haven’t received their W-2’s yet.
New W-4 forms
Make sure that your employees fill out a new W-4 form if they need to make changes to their federal filing status due to their personal or financial situation – this can change depending on whether an employee had children, got married, or want to add additional withholding. If you need to access the most up to date copy of a W-4, you can follow this link: https://www.irs.gov/forms-instructions
End of Year Bonuses
Pay out any of your end of the year bonuses before December 31st if you report on a cash basis and want to make the deduction for the current year. If you report on an accrual basis, the deadline for tax deductible year end bonuses in the current year is March 15th.
If you have any employees that are still getting paid via paper checks, consider encouraging them to sign up for direct deposit. Let’s face it, it’s just easier, and checks won’t get lost in the mail or be eaten by their dog. For employees that don’t have a bank account or don’t want to be paid electronically, try offering to pay them via a pay-card instead (it’s like a debit card, just not linked up to their bank account. Their paycheck is routed to their card that they can use to purchase pretty much anything and make ATM withdrawals). There are also some states that actually allow you to mandate that your employees receive direct deposit. For answers about direct deposit laws, check your state’s department of labor for more information.
Remind employees of the end of the year FSA deadlines. If your employees have flexible spending accounts that don’t roll over to the new year (whether they’re for health or dependant care), just remind them to use them up before they’re forfeited. I would appreciate the reminder if that were me, so don’t forget! Your employees will love you for it!
Revisit your taxable fringe benefits of your employees, and make sure that they were handled correctly. Were the withholdings dealt with properly for any taxable fringe benefits granted to employees? Remember, this includes things like company provided transportation or parking, personal use of company vehicles, or bonuses. Hire an accountant for this one, if you need to – It can get tricky.
Update Tax Deposit Schedules and Rates
Did you receive notice of changes in your required tax deposit schedule or state tax rates for the new year? Make sure you update your records or notify your payroll service provider if anything about these changes. If you do this now, it can help eliminate potential penalties and interest for late or incorrect payments in the future. If you’re not sure, contact your accountant or state taxing authority for assistance.
Need a Payroll Upgrade?
Is your current payroll service or provider keeping up with the current needs of your business? Maybe you’ve seen a lot of unexpected growth, or you’re overwhelmed by doing it yourself. Either way, if you need to make any changes or move to a new solution, it is always easiest and way less expensive if you do it effective January 1st.
New year, new you – make early payroll tax preparation one of your resolutions! Give these a try, and see how your business stacks up to this year end compared to last! You’ll be shocked at the positive difference a couple of small organizational changes can do to help your business run more efficiently! Bring on the champagne!