The ultimate year-end payroll checklist

November 12, 2019
5 minutes read

Year-end can be a very busy time if you run your own business. There are plenty of steps you'll need to take as you roll in the new year, including planning your payroll and reviewing your accounting documents. We imagine the last thing you’d want to do after the start of a new year is dig back into documents from the current tax year 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.

Let’s dive right in!

Year-end checklist for U.S. businesses

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.

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

Important dates for U.S. payroll tax season

  • January: 1099-NEC and W-2 forms will be available through your payroll provider.
  • January 31st: Final date to submit your W-2 and 1099-NEC tax forms to the Social Security Administration and state agencies if applicable, as well as provide copies to your employees and contractors. Tip: If the deadline to file lands on a weekend, this deadline will move to the following business day.
  • If you forget to pay payroll taxes, there are specific steps you need to take to avoid penalties, including appealing for a waiver

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 paycheck of the year.

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 within the current year. 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-NEC.

Step 3: Update employee tax profiles for the year

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 1st of next year if their personal information or allowances have changed.
  • Past employees:Send W-2s to any employees you paid in the past tax year 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 31st of the current year—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 next year, 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 next year, you may have been issued a new EIN. To confirm this and to check out rates for the new year, you can review your account information with the IRS.

Step 6: Confirm your deposit frequency for the new year

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 2019 - June 30 2020. If you have been a 944 (annual) filer for the current year, or in the past two years, your lookback period is the 2018 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 the year regarding any tax deposit/filing frequencies.

Step 7: Verify employer tax rates for the new year

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 next year’s taxes.

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

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 your business

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

Start your free trial

Year-end checklist for Canadian businesses

This checklist covers everything you need to create and file T4 and T4A summaries and slips and pay remittances in the great white north, so you’re ready to take on next year.

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

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 the benefits you paid them throughout the year, leading up to the final paycheck. If any benefits aren’t accounted for, add these to their last paycheque of the year.

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

Make sure you have the correct names, addresses, and Social Insurance Numbers for every employee you paid this year.

Step 3: Update employee tax profiles for the new year

  • Current employees: Remind your employees to complete new federal and provincial TD1 forms for the new year if their personal information or allowances have changed. If there are no changes, make sure their claim amounts are updated with the new years basic exemption amount.
  • Past employees: Send T4s to any employees you paid in the past year who are no longer working for you.

Step 4: Bring everything together with reconciliation

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

Wave tip: For next year, leave payroll cheques 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 Business Number/Payroll Account Number 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 Canada Revenue Agency (CRA) Payroll Account Numbers.

This means you would have already submitted your T4 slips from before the change. Ensure that the wages reflected on your year-end forms only include wages that were paid under your new CRA Payroll Account Number.

Step 6: Confirm your deposit frequency for the new year

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

Step 7: Confirm your payroll remittances.

If you’ve paid employees this year through different providers or by cheque, you’ll need to reconcile your records through December 31st—including identifying outstanding cheques—and compare payroll remittance withdrawals from your bank account to the amounts on your remittance liabilities records.

Download your own payroll checklist here >


More support for tax season

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

By Emily Spence - Payroll Compliance Specialist
Categories

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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