October 20, 2016 |
Year-end payroll process is complicated, and there’s no doubt there.
You have to calculate taxes, compensation, deductions and still deliver everything on time to your employees as well as the State of California.
Unfortunately, businesses are notorious for creating errors during their year-end closeouts, especially as they try to complete other end-of-year to-dos.
While you are getting ready to close out payroll this year, there are some ways you can lessen the stress and look forward to year’s end.
Now is the time to make sure your employees’ information is correct and up-to-date. That means checking employee addresses, social security numbers, and their names.
Have an employee that got married this year? Change their name in your payroll if they have already done so with the IRS.
The IRS may impose a penalty if your W-2s are incorrect or missing a social security number. In fact, these fines could be up to $100 depending on the offense, according to the IRS.
If you aren’t careful, you could have multiple penalties add up quickly — and that could certainly devastate your year-end budget.
Tips For Updating Employee Information
The ACA has certainly complicated payroll matters, especially for year-end payroll.
There are a few items you need to do to stay in compliance for the end of 2016. The IRS requires that you:
Any contributions to retirement accounts (i.e. 401(k), 403(b), etc.) cannot exceed the limits set by the IRS.
You will want to verify that your employees did not exceed these contribution amounts while completing the information for the W-2s.
The IRS website has a complete list of contribution limits for the year 2016, which include IRAs, 401(k) and profit-sharing plans.
Fringe benefits are what you provide to your employees. These are tax-exempt under IRS Publication 15, but you are required to assess these at year’s end and report them to the IRS.
Your company’s fringe benefits will vary, but may include:
You may want to add fringe benefits for the upcoming year to help lessen your company’s tax burden too. You could offer one of the above fringe benefits or review the options through the IRS to see what may help your business reduce taxes, according to Fox Business.
For a truly stress-free experience, it might be in your best interest to call in the professionals.
While you could certainly tackle the task of year-end payroll yourself, you have a hearty to-do list already (and you don’t need to worry about reading endless IRS publications).
A professional PEO can help you with your end of year filings, preparing your tax returns, and submitting W-2s.
They may also be able to identify potential fringe benefits that help you lessen your tax burden for the upcoming year.
While you are doing your payroll for year’s end, don’t forget to start planning for the upcoming year.
This includes handing out new W4 forms to all employees for completions and entering them into your payroll system.
Any employee that claims exempt is required to submit a new form by the following year. You can use IRS Publication 505 to determine how much you must withhold from each employee’s paycheck and what exemptions can be used.