Towards the end of each calendar year, businesses are tasked with reviewing and verifying employer, employee and payroll data to prepare a number of local, state, and federal tax forms. A streamlined year-end payroll process ensures legal compliance, accurate reporting, and timely filing. Our year-end payroll checklist can help you prepare for all of the related steps in this process – from verifying employee information to adjusting for forthcoming labor law changes. Here, we’ll provide answers to common questions regarding necessary federal tax forms, deadlines, and best practices for internal reporting.
Forms and Reports for Year-End Payroll
Below, we’ll explore questions regarding wage and tax information that must be submitted to the Internal Revenue Service (IRS) and Social Security Administration (SSA) for year-end payroll purposes.
What forms do I need to file for employees and contractors? When are the deadlines for filing?
W-2 and W-3 forms, which report wages and withholdings to the IRS and SSA (respectively) must be electronically filed by January 31st. Remember that you may also need to file W-2s at the local and state levels to comply with regional tax laws.
1099-NEC, an income statement for contractors, must be filed for any nonemployees who earned $600 or more (or over $10 in royalty payments) by January 31st.
Form 1096 must be filed for any nonemployees you’ve paid and provided with a 1099 MISC or 1099-NEC only if you are submitting your tax information by mail. Whether submitted to summarize a 1099 MISC. or 1099-NEC, these must be filed by February 28th.
Which forms do I need to file for health insurance, unemployment, and payroll taxes?
Form 1095-B must be filed if your business provided health insurance. This must be submitted to each employee who received health coverage, and to the IRS by March 31st.
Form 940 must be completed and filed to fulfill Federal Unemployment Tax (FUTA) liability by February 10th.
Form 941, which reports employee payroll taxes (Medicare, social security, and federal income taxes) on a quarterly basis, must be filed by January 31st. Your business could qualify for yearly rather than quarterly payroll taxes if your payroll taxes are lower than $1000 annually. In this case, a small business is eligible to file an annual Form 944 instead – due February 10th, assuming deposits are made in full and on time.
Which tax forms do I need to send to employees?
To complete their own tax filings for the past year, your employees will – at bare minimum – need their W-2 or 1099 forms to document individual pay and tax information. These forms must be delivered to your employees by January 31st. Depending on your company benefits and the specifics of each employee record, you may also need to send additional forms like Form 1095-B and others. Consult your payroll provider for additional clarification before sending out tax forms to employees.
Should I run any internal year-end payroll reports?
Even after you’ve reported all information to the SSA and IRS, we recommend running year-end payroll reports to gain “in-house” insights and inform payroll decision-making in the new year. Whether you complete these reviews yourself or with the help of a qualified payroll provider, this historical data can help you make optimal payroll decisions for your business, especially if you’re preparing for a new recruitment, hiring, and onboarding cycle.
For instance, you could run reports to analyze retirement contributions, workers’ compensation, and paid time off (PTO). A PTO report can help your business bypass staffing or scheduling issues in the coming year, while a workers’ compensation report can help you and your insurance provider determine whether an adjustment to company premiums is necessary. From the perspective of your workforce, retirement and employee summary reports are helpful to your employees, granting them the opportunity to alter contributions or plan for their own taxes and budgets in the new year.
Optimize Payroll with Payday
The insights you gain from year-end tax filing and internal reporting are maximized when you work with a payroll provider who can seamlessly integrate your payroll with timekeeping, benefits administration, and essential HR functions. That’s why we offer a comprehensive payroll solution that grants you access to the expertise, software, and customer support to keep your payroll efficient throughout the entire calendar year. Tax season can be overwhelming for businesses, but it’s also an opportunity to upgrade payroll processes and HR policies to start the new year strong. Contact us today to start our collaboration.