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As the end of the year approaches, it’s important to make sure that your payroll year-end information is up to date. To prepare for 2022, there are numerous steps for year-end payroll reporting and taxation that can help keep your information organized and accurate.
Even if you’re experienced with end-of-year payroll, it can be easy to overlook crucial steps, which can leave you scrambling to tie up loose ends. Using an organized year-end payroll checklist can help make sure you don’t overlook any major requirements from a payroll or benefits perspective.
How to Prepare Before the Last Payroll of the Calendar Year
Here’s a closer look at steps you can take now to prepare for the end of the year, even before your last payroll check is written.
Verify Business Information
The business information you have on file for tax purposes should always be accurate. Specifically, verify your state and federal Employer Identification Number (EIN), as well as your company name and address. You’ll want to do the same with your state unemployment account number(s).
Set Compensation for Next Year
As you prepare your budget for the coming year, you may want to factor in any expected pay raises for your staff. Of course, the amount you offer depends on what you can afford after factoring in both the cost of compensation and payroll taxes.
Keep in mind that the wage base for the Social Security portion of FICA in 2022 will be $147,000, which as an employer will result in paying more FICA taxes, as the 6.2% share is applied to this higher wage base. For non-exempt workers, check to see if there are any 2022 minimum wage rate increases for the states and localities in which you operate.
Confirm Employees’ Identifying Information
When it comes to payroll, year-end is a great time to check for inaccurate or outdated employee information, since these inaccuracies can lead to costly delays and reprints of W-2s, as well as IRS-imposed penalties. Ask employees to confirm their full name, Social Security number, address, and additional contact information to help streamline your end-of-year processes and ensure that vital tax documents get to the correct location.
Record All Processed Paychecks
While you won’t be able to finalize your annual payroll and tax numbers until after the final pay period, you can certainly get a jump start on recording and verifying everything that has already been processed. Review previous pay periods to ensure that all amounts are logged accurately by verifying:
- Employee wage amounts
- Benefits deductions
- Child support or other miscellaneous deductions
- Disability or other benefits payments
- Special tax exemptions that may have occurred throughout the calendar year
Order W-2s, W-3s, and Other Applicable Tax Forms
At a minimum, you will need to provide your employees with end-of-year tax statements via IRS Form W-2. You can get these necessary forms directly from your payroll service provider, printed from your payroll management system, or directly from the IRS.
Determine Your Payroll Policies for the New Year
While many businesses follow the same payroll schedule and policies year after year, you may be considering a change to your payroll structure. In the age of more employees expecting quick access to their paychecks, you may want to evaluate whether options such as pay-on-demand make sense for your business. The end of the year is the best time to implement a change, so evaluate those decisions now. Determine the paycheck deposit schedule you plan to use in the new year, as well as what options you’ll have for employees to receive their paychecks.
To learn more about how Paychex can help your franchise streamline year-end planning and other payroll and HR tasks, visit the Paychex Franchise Solutions page.