At year-end, small and medium-sized businesses (SMBs) should complete a number of tasks related to payroll to ensure compliance with tax and employment laws and to prepare for the new year. In this article we will cover some specific steps that SMBs should take at year-end.
Make Sure Your Year End Reporting is Complete
Every business that pays regular wages is obligated to withhold and remit payroll taxes both on a quarterly and an annual basis.These liabilities are reported to their respective state and federal agencies on a quarterly basis throughout the year. However, in the fourth quarter filing requirements, there is an additional report to be completed, annual reconciliation. These reports validate the information that is remitted throughout the year as well as confirm state W-2 reporting.
At the close of each quarter, your payroll vendor should reconcile all payrolls run throughout the respective reporting year in order to ensure accurate reporting. Once reconciliation is complete, state and federal reports are created and sent to the agencies on your behalf and copies are then uploaded to your company portal or sent to you for your records. These are to include both the social security administration W-2’s and the state level W-2’s.
When are these reports due?
Typically businesses must report their tax liability and employee data no later than the last day of the month following the close of a year however, some states may vary slightly. Should the last day of the month fall on a weekend or holiday, the reports and tax liability will be due the following business day. The due dates for W-2 remittance varies between January 31st and February 15th.
Important due dates:
|W-2 and W-3
|January 31, 2023
|1099-NEC for contractors
|January 31, 2023
|940, 941, 944
|January 31, 2023
|State and local authorities
|January 31, 2023- February 15, 2023
How Can You Help?
To ensure your year end reporting is accurate, you should take the following steps:
- Verify business information such as contact and mailing addresses
- Inform your employees to verify their contact information and update their W-2 delivery method
- Complete year end bonus payrolls runs if applicable
- Complete third party payments and 2% shareholder
- Verify all employee social security numbers are up to date and correct
- Run reports to ensure wage accuracy prior to filing year end documents
What to do After Year End Processing?
Update Wage, Tax, and Benefits Information for the upcoming year
Make sure to update all compensation for employees where applicable. Ensure that employees are given the opportunity to update their withholding details if necessary going into the new year.
Distribute Forms W-2 to All Employees
Typically W-2’s are shipped between January 15-25th. Once your company receives their W-2 package you will need to ensure that all paper W-2’s are distributed to your employees no later than January 31st. Employees are required to receive a copy (or have electronic access) of their W-2 by January 31st of the following year to stay in compliance with Federal Regulations.
Update your 2023 Tax Rates
With the close of the year comes another update to your unemployment tax accounts. Each year the state will reevaluate your unemployment accounts and will update your tax rate in respect to the activity that occurred during the year. Each state will begin mailing out tax rate notices between November and December, it is imperative to have this information updated in your tax setup to avoid miscalculation of your tax liabilities.
Review and update payroll policies
Take the opportunity to review and update your payroll policies, including any changes to tax laws or employment regulations that may have occurred during the year.
Prepare for the new year
Set up payroll for the new year, including updating employee records, payroll accounts, and any necessary tax forms.
Completing these tasks at year-end can help ensure compliance with tax and employment laws and help your business run smoothly in the new year. It is important to consult with your payroll provider to ensure that all necessary steps are taken and to address any specific questions or concerns you may have.