I don’t know how it’s that time of year again, but it is. Year-end. The time to get out your lists and make sure everything’s in order so you can start the new year off on the right foot. And if you have employees, you have a few year-end responsibilities to wrap up.
No worries, though. Your year-end checklist for employers has arrived.
Year-End Checklist For Employers
If you need a credibility check, let me help put your mind at ease. I’ve been an employer for over three decades, so I know how difficult it can be to keep your responsibilities in check.
That’s why I made it my mission to simplify other employers’ responsibilities through my accounting software and payroll company, Patriot Software … and why I’m going to pass on my year-end employee checklist to you.
Here are the main things you need to make sure you put on your employee year-end checklist:
- Confirm employees’ identifying information
- Prepare for your Form W-2 responsibilities
- Check employment tax rates and wage bases
- Review employee benefits
1. Confirm Employees’ Identifying Information
Are your employees really who they say they are? Although I’m being facetious, there’s truth to my little joke. You do need to confirm some key pieces of identifying information for each of your employees.
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And what better time to do it than at year-end, when you’re gearing up to prepare Forms W-2?
Make sure you have the following information for each employee (and that it’s correct):
- Legal name
- Social Security number
Having a single number or letter out of place could mess things up, delay filing times, and make you have to redo work. Take a little time now to double (and triple) check your information is current and accurate. Doing a quick check now could save you a bit of time later on.
2. Prepare For Your Form W-2 Responsibilities
The big thing that’s probably on your mind at the end of the year is Form W-2. It’s the main attraction, right?
Sending out Form W-2, Wage and Tax Statement, to each employee by January 31 is something every employer is responsible for. I’m pretty sure that’s what they start out with in employer school (chuckle, no amount of books can prepare you for entrepreneurship).
Take a look at your Form W-2 responsibilities at year-end (and at the beginning of the new year):
- Order forms
- Review records
- Pay attention to nuances (e.g., W-2 reporting changes due to Covid-19)
- Fill out forms
- Distribute to employees
- File Forms W-2 (and W-3) with the SSA and any state and local governments
Do you do everything by hand? If you really want to make things easier for next year-end, consider signing up for payroll software. And when you use full-service payroll, you won’t have to worry about filing Forms W-2 with the proper tax agencies. Just something to think about if you want to check things off a little faster in the future.
3. Check Employment Tax Rates And Wage Bases
When it comes to tax rates and wage bases, nothing ever lasts. That’s why there’s a new Social Security wage base and state unemployment tax rate, also known as SUTA or SUI tax, nearly every year.
As a quick overview, the wage base is the maximum amount of money that can be taxed in a calendar year. Social Security tax, unemployment tax, and some state-specific taxes have it. And unlike other tax rates, SUTA tax is specific to each employer.
And if you don’t set a reminder to check these out before the end of the year, you could have some inaccuracies in the new year.
Before you run your first payroll next year, you should:
- Keep an eye out for your new SUTA tax rate (your state will likely send this to you) and any wage base changes
- Pay attention to the new Social Security wage base ($142,800 in 2021, up from $137,700)
- Sneak a peek at the IRS’s federal income tax withholding tables
Cloud software automatically updates federal tax rates and wage bases, so you would only need to worry about gathering business-specific rates (e.g., SUTA tax).
4. Review Employee Benefits
The end of the year is also the time to look at your employees’ benefits. Are they going to be the same in 2021? Do you have to pay anything out or roll it over?
Pay attention to:
- Accrued time off
- Retirement plan eligibility
Do you offer employees paid time off (e.g., vacation time, sick time, etc.)? If you do, year-end is the time to look at how much your employees accrued but didn’t use. And depending on your paid time off policy, you may have to cash out that time or roll it over into the new year.
Look at retirement plan limits and catch-up limits. Send out notices to your team so they know how they can enroll in retirement plans or adjust their contributions.
For most workplaces, year-end coincides with open enrollment for insurance. During open enrollment, employees can elect the types of coverage they want in the new year. Be sure to gather all of this info.