Article written by Sandi Frank, Manager of Consulting Services, and Sandra Egbert, Sr. Payroll Consultant
We know it is tough to believe, but year-end will be here before we know it! This year has seen its fair share of complications, and there is likely much more in store for 2023. So, the time to review your year-end processes and begin preparations for the upcoming year is now!
Year-end preparation begins at the start of each new year, verifying new earnings/deduction code setups for correct tax categories and W-2 reporting. System updates must be made to State Unemployment rates as they change throughout the year. Payroll departments must remain agile and ready to adapt to changing legislation and regulations to ensure accurate tax reporting and annual returns. This was never so evident as during the COVID crisis.
An accurate and painless year-end processing results from all the efforts the payroll team puts into each payroll. Each payroll is a building block to a successful year-end process! So, how do you ensure that your company is on track?
Have you completed everything you should by now?
By now, you should have created a year-end checklist. This list will be a road map of all the tasks to be performed during the remainder of the year – some will carry over into the new year. Below are of the items that you should have already completed to be on track with your year-end checklist:
- Assemble a year-end team consisting of all contributors to the year-end process and begin defining roles and responsibilities
- Accounts Payable (for cash and non-cash employee payments)
- Finance/Treasury (uncashed checks, year-end deposits)
- Human Resources (executive compensation, stock, taxable fringe benefits, ACA reporting, etc.)
- Complete a payroll reconciliation of earnings, deductions, taxable wages
- Complete a tax reconciliation to balance the three previous quarters, looking for any issues and correcting before the last payroll of the year
- Review Audit Reports to ensure proper taxation and reporting
- Remote workers audit – employee tax setup
- Temporary relief measures extended
- Run a preliminary W-2 detail report and perform standard auditing to ensure accuracy
- Review the W-2 negative wage detail report and correct outstanding issues
- Complete adjustments as needed by quarter due dates or request amendments to tax filings as necessary
Remember: Your payroll provider is a reliable source of compliance information and will provide a list of tasks that must be performed to close out the year and initiate annual reporting. However, do not rely solely on your payroll provider for accuracy. Bad data in your system can result in inaccurate data coming out. Your company is responsible for reporting accurately! Always confirm your data is correct.
- Truncating Social Security numbers on employee copies of Form W-2 (Copies B, C, and 2) is allowed
- Extension of the suspension of federal student loan payments and garnishments to 12/31/22
- 1099 NEC. A new tax form to report non-employee compensation. It replaces what was reported in Box 7 of the 1099 Misc. in past years. The form has a new layout; the recipient copy is a 3-up form
- Remote workforce considerations on reporting and taxation
- Minimum wage – 25 states raised their minimum wage in 2022
- Annual Changes for 2023
- Standard mileage and per diem rates
- State unemployment and disability wage bases/rate
- Social Security wage base
- FSA and HSA annual limits
- Deferred compensation limits
- Minimum wage changes by location
- Personal exemption affecting wage orders
Are you feeling overwhelmed? PayTech can help!
We are here to help. Our team of experts are apprised of the constantly changing requirements that affect year-end. Here are just a few ways our experts can help you:
- Audit Form W-2 and other annual filings
- Verify FEINs, State Withholding, and Unemployment Account Numbers
- Multistate Taxes/Remote employees/Nexus
- Register for tax accounts in new states and locals
- Balance and reconcile taxes
- Account for non-cash fringe benefits, escheatment reporting, adjustments, voids, third-party sick pay
- Audit system reports for year-end reporting accuracy
- Assist with the partner-provided year-end checklist to ensure all required tasks are complete, build a year-end checklist and process specific to your organization
- Review of federal, state, and local regulation changes impacting current and upcoming year, including annual changes to wage bases and tax rates
- Payroll Compliance review
PayTech can take some of the tasks off your plate, allowing the payroll team to enjoy the holiday season and complete the year-end accurately and on time! PayTech has the expertise and experience with over 20 years of supporting companies like yours. Reach out to see how we can help you!