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Time is running out to close out your payroll for the year—but if you start now, you’ll be able to achieve year-end success.
Get on track, avoid extra work, and have peace of mind with this 10-step guide:
This year, the ACA is requiring small employers with self-insured health
plans and employers with 50 or more full-time (or full-time equivalent)
employees to report health coverage information to the IRS and to
employees. Follow our handy ACA Reporting Road Map to learn more
about your updated responsibilities.
STEP 2
STEP 1
Understand the Affordable Care Act (ACA) changes, and prepare.
Understand the Fair Labor Standards Act (FLSA) changes, and prepare.
The Department of Labor is making important updates to the FLSA. If federal
approval is granted, the minimum yearly salary requirement for overtime-exempt
employees will increase from $23,660 to $47,476.
During the currently uncertain federal review period, consider seeking legal
counsel to discuss possible next steps for your business. If applicable, plan to
either increase your employees’ salaries or to pay overtime. Stay up-to- date on
crucial FLSA developments at ADP’s FLSA page.
10 Steps to Year-End Payroll
The IRS issued 6.8 million penalties totaling $4.5 billion related to payroll employment taxes in 2013.*
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It’s important to review and confirm basic business
information, such as your tax ID number and
company email address. Although this information
may seem like a no-brainer, mistakes can happen.
For instance, W-2s are mailed to your company’s
shipping address—if your legal business address
is different and you forget to update your account,
you won’t receive your W-2s on time. Double
check these items with laser precision now to
avoid unnecessary hassle later.
STEP 4
STEP 3
Review and verify company information.
Understand the Federal Unemployment Tax Act (FUTA) changes, and prepare.
Certain states are now subject to FUTA credit reduction, meaning that
businesses in these states will need to pay higher FUTA taxes per employee.
Find out if your business will be subject to higher taxes under the 2016
provisions here, and budget accordingly.
Communicate.Certain departments—such as HR, finance, and IT—may affect the creation and distribution W-2 forms. Coordinate your year-end payroll
processing with relevant teams accordingly.
Make a timeline.Create a timeline for the first payroll of the new year and the last payroll of the previous year. Plan ahead for interim payroll to prevent
payment delays.
Update your software.Make sure you’ve installed the most recent updates to your payroll software—this will make it easier for you to take recent changes into account
while wrapping up your year-end payroll.
Bonus Points Quick List
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Begin reviewing your employees’ year-to-date earnings and deductions in your
reports, and confirm those amounts. Don’t forget to account for both current
and former employees.
STEP 7
Review and verify earnings and deductions.
Be sure to double check employee and contractor information, such as SSNs
and 1099s. It might be easy to lose track of which employees have moved or
gotten married this year.
Do yourself—and your employees—a favor, and devote the necessary time to
confirming these details, and prevent easy-to-avoid mistakes.
STEP 5
Review and verify employee information.
STEP 6
Check your employee totals.
Before your last scheduled payroll for the quarter, make sure to update any
employee totals—such as PTO and retirement plans—that you want to include
in the quarter balances. Before December 31, in the fourth quarter, you must
update any missing employee totals and run any bonus payrolls. If you miss the
deadline and have to run a special payroll, the government may charge you
penalties and interest.
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* Source: Bloomberghttp://www.bloomberg.com/news/articles/2014-04-08/small-business-owners-have-a-4-dot-5-billion-payroll-tax-problem
STEP 10
Christmas may affect payroll processing—plan ahead.
Christmas Day is Sunday, December 25, 2016, and the federal holiday will be
observed the following day. Does your payroll schedule coincide with Monday,
December 26? If so, be aware that payrolls won’t be delivered that day.
Payrolls processed on Friday, December 23, will be delivered Tuesday,
December 27, and payrolls processed Christmas weekend will be delivered
Wednesday, December 28. Prepare your payroll processing accordingly to
avoid delays.
Fringe benefits are forms of compensation provided to employees, including
company-provided vehicles and gym memberships—and they’re taxable. If
this type of benefit is applicable to your business, it must be included in your
employees’ pay and reported on employees’ W-2s, unless otherwise specified
by the law. Not sure if you provide fringe benefits? Check out this list.
STEP 9
Review and report fringe benefits.
Federal law requires businesses to report taxable and non-taxable sick
payments made to employees from a third party. This includes any taxes
withheld on those payments. If the third party does not report sick pay, your
organization must report this information on your employees’ W-2s no later than
January 1, 2017.
If applicable, it’s important to obtain this information ASAP, and then to process
these entries on or before your last payroll of the year. Otherwise, your Form
941 and W-2s will not be accurate.
STEP 8
Review and report third-party sick pay.
Want to learn more about ADP’s expertise on year-end payroll?
Talk to one of our well-informed representatives at 1-800-225-5237 or visit www.adp.com/payroll.