The ultimate year-end payroll checklist

Nov 12, 2019 | 3 minutes read | Payroll

2020 is upon us—a bright and shiny new year for your business. We imagine the last thing you’d want to do after the start of a new year is dig back into documents from 2019 and review your payroll.

That’s why we made the ultimate checklist that you can conveniently reference to stay ready and compliant—no matter who your payroll provider is.

And if you are using Wave Payroll, we made you a Wave-specific list here.

Let’s dive right in!

Year-end checklist for U.S. businesses

Are you a Canadian business? Click here

If you’re paying employees and/or independent contractors in the U.S. there are some important steps you need to take to get your business and team in good shape for the new year.

Important dates for U.S. payroll tax season

  • January: 1099 and W-2 forms will be available through your payroll provider.
  • January 31st: Final date to submit your W-2 and 1099 tax forms to the Social Security Administration and state agencies if applicable, as well as provide copies to your employees and contractors.

Step 1: Review your workers’ wages and benefits

Check the wage and benefit information for each employee to make sure you can account for all wages and benefits you have paid them throughout the year, leading up to the final paycheck. If any benefits aren’t accounted for, add these to their last 2019 paycheck.

Step 2: Review your employees’ and contractors’ personal information

Make sure you have the correct names, addresses, and Social Security Numbers (SSN) for every employee and contractor you paid in 2019. Note that the name you have listed for your employees must match what appears on their SSN card (look out for nicknames and middle names).

For independent contractors, you’ll also need to check that their Tax Identification Numbers (TIN) are correct, and ensure payments are recorded for any bills that need to be included on form 1099-MISC.

Step 3: Update employee tax profiles for 2020

Remind your employees to review their withholding allowances for federal and state income taxes.

  • Current employees: Have them complete a new form W-4 (or state equivalent) by January 1, 2020 if their personal information or allowances have changed.
  • Past employees: Send W-2s to any employees you paid in 2019 who are no longer working for you.

Step 4: Bring everything together with reconciliation

If you pay your employees by check, perform a payroll bank reconciliation through December 31, 2019—including identifying outstanding checks—comparing state, and federal payroll tax withdrawals from your bank account to the amounts on your tax liability records.

Wave tip: For 2020, leave payroll checks where they belong: in the past. Automate your payroll by enabling direct deposit to pay employees faster, for zero additional fees.

Step 5: Make sure your employer information is up-to-date.

Review your business’ legal name, address, and Employer Identification Number (EIN) to ensure they’re correct. If you have made any changes to your business structure throughout the year (like incorporating from a sole-proprietorship), you will have two Employer Identification Numbers (EINs).

This means that you will need a set of year end forms with your old EIN from before the business structure change, and another set with the new EIN and wages paid after the change. 

If your business structure is changing in 2020, you may have been issued a new EIN. To confirm this and to check out 2020 new rates, you can review your account information with the IRS.

Step 6: Confirm your deposit frequency for 2020

Deposit requirements can change each year, so make sure you have the correct deposit frequency so that you don’t miss any deadlines.

Review your lookback period for IRS withholding to ensure you have the correct deposit frequency heading into January 2020.

If you are a 941 filer (quarterly) your lookback period is July 1 2018 - June 30 2019. If you have been a 944 (annual) filer for the current year, or in the past two years, your lookback period is the 2017 calendar year.

Regardless of your filing status, if you have reported $50,000 or less of taxes for the lookback period, you are a monthly depositor. If you have reported more than $50,000 in the lookback period, you are a semiweekly depositor.

As well, the IRS and/or State agencies may have sent you a notice before the end of 2019 regarding any tax deposit/filing frequencies.

Step 7: Verify employer tax rates for 2020

Check your tax rates for state unemployment and disability insurance. If you’ve received a letter from any government agency with a new tax rate, update these for your 2020 taxes.

Many agencies start issuing new 2020 tax rates in November of the preceding year, so be on the lookout for your new rate and ensure you have it updated for January 1, 2020.

Download your own payroll checklist here >

More support for tax season

You can find all business and tax information with the IRS on their website here. You can also join the Wave community to learn, connect, and get inspiration from business owners and accounting professionals.

Try Wave for 2020

Still paying your employees and contractors through manual payroll? Join Wave Payroll to save time, easily manage taxes, and feel confident at tax time.

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