Payroll Year-End Checklist

Run the active employee roster through SSA's Business Services Online (BSO) Social Security Number Verification Service before generating W-2s. Mismatches detected after filing become $310-per-form penalties under IRC §6721. Confirm legal name, SSN, and current mailing address — name changes from marriage or divorce are the most common defect.

Every active employee needs a current W-4 (2020+ format) and the applicable state withholding form. Pull the prior-year exempt list — anyone who claimed exempt must submit a new W-4 by Feb 15 to maintain exempt status, or default withholding kicks in at single/zero.

Pull the term list from HRIS and reconcile to the final paycheck register. Confirm unused PTO payouts, severance, and any deferred bonus payments hit the correct year. State final-pay rules vary — California requires payment on the termination date for involuntary terms, with waiting-time penalties otherwise.

Reach out via the last known personal email or phone to confirm where the W-2 should mail. W-2s sent to a stale address are still considered 'furnished' under IRS rules, but undeliverable mail creates a Q1 support burden and frustrated former employees calling the front desk.

Pull the AP vendor list filtered for non-employee compensation paid over $600 YTD. Every contractor needs a current W-9 with a TIN that matches IRS records — use the IRS TIN Matching service through e-Services. Missing W-9 means backup withholding at 24% should already have been in place; if it wasn't, the firm owes the under-withheld tax.

Sum Q1–Q4 Form 941 (lines 2 wages, 3 FIT, 5a–5d FICA wages) and tie to the YTD payroll register. Variances are usually voided checks reversed after period close, manual checks issued offline, or third-party sick pay not yet recorded. Document each reconciling item — these are the same numbers that must agree with the W-3 transmittal.

Run the manual-check and void-check report from the payroll system. Confirm each is reflected in the GL and in the federal/state tax accumulators. Manual checks issued outside the cycle frequently miss the tax engine; voids reversed after a deposit was made create FICA over-payments that need a refund or Form 941-X.

Group-term life over $50K (GTL → Box 12 code C), personal use of company car (PUCC → Box 14), HSA employer contributions (Box 12 code W), and third-party sick pay must hit the W-2 before close. Confirm the disability carrier sent the third-party sick pay statement; Form 8922 is required if neither party reported on the W-2.

Sum employee deferrals and employer match per the payroll register and tie to the 401(k) recordkeeper's annual contribution report. Excess deferrals over the §402(g) limit (plus catch-up if age 50+) must be returned to the participant by April 15 to avoid double taxation. HSA and dependent care FSA caps reconcile here too.

Run the W-2 preview from the payroll system. Spot-check a sample for Box 1 (taxable wages), Box 3/5 (SS/Medicare wages), Box 12 codes, and Box 14 entries. Sum all W-2s and confirm totals tie to the W-3 transmittal — this is the figure the SSA will reconcile against the four 941s.

Common errors: Roth 401(k) coded D (pre-tax) instead of AA; HSA employer in Box 14 instead of Code W; dependent care in Box 14 instead of Box 10. Mis-coded boxes generate IRS notices to the employee, not the employer — a quiet support burden that surfaces in February when employees file their 1040s.

1099-NEC for non-employee compensation over $600 (services). 1099-MISC for rents, royalties, prizes, and gross attorney proceeds. Corporations are generally exempt except for legal services and medical payments. Run TIN matching one more time before generation — a mismatch surfaces as a CP-2100 notice and 24% backup withholding for next year.

Adjust affected W-2s for the third-party sick pay statement: include in Box 1 if taxable, exclude FIT withheld if the third party deposited it, and check Box 13 'Third-party sick pay'. File Form 8922 if neither the employer nor the third party reported the wages on the W-2.

FUTA annual return. Due Jan 31 (Feb 10 if all FUTA deposits were timely). Watch for credit reduction states — California, New York, the U.S. Virgin Islands and others have lost the full 5.4% credit in prior years and may apply this year. The DOL publishes the final list in mid-November.

Quarterly federal payroll tax return. Schedule B is required for semiweekly depositors; misalignment between Schedule B liability and actual deposits triggers a Federal Tax Deposit penalty notice. Reconcile the four 941 totals to the W-3 — variances generate IRS reconciliation notices (CP-2100 / CP-2100A).

Each state has its own annual reconciliation form and W-2 transmittal — examples: NY-45, CA DE-9, IL UI-3/40, OH IT-941. Multi-state employers track 10–50 jurisdictions. Maintain a state-by-state matrix with portal URL, due date, and TCC; relying on the payroll system to prompt every state has gaps.

E-file is required at 10+ W-2s (the threshold dropped from 250 in 2024). Use SSA's Business Services Online portal. Both employee copies and SSA submission are due Jan 31 — there is no employer-copy extension that mirrors the old paper-filing window.

1099-NEC is due to the IRS on Jan 31 (no automatic 30-day extension applies, unlike the older NEC-on-MISC era). 1099-MISC is due Feb 28 paper / Mar 31 e-file. IRIS replaced FIRE for many filers starting in 2023; confirm the firm's TCC and chosen transmission method before deadline week, not during.

SSA publishes the new Social Security wage base in mid-October each year (2024: $168,600). FUTA wage base remains $7,000. Medicare additional 0.9% over $200K applies at the individual level. Confirm the payroll system pulled the new year's federal limits before the first January pay run.

Each state issues a new SUI experience rate notice in Q4 — most by Dec 1. Load the rate, the taxable wage base, and any new surcharges (NY MCTMT, NJ disability, NJ family leave, WA Cares). A missed rate update means under- or over-withholding all year, with Q1 amendments to follow.

Build the 26 (biweekly) or 24 (semimonthly) pay periods, accounting for federal banking holidays that delay ACH settlement and any 27th-pay-period years for biweekly cycles. Communicate the schedule to employees before the first January run.

Confirm the payroll system rolled YTD wage, FICA, and FUTA accumulators to zero. Update annual deferral caps: 401(k) §402(g), age-50 catch-up, SECURE 2.0 ages 60–63 enhanced catch-up if applicable, HSA family/single, dependent care FSA, and commuter benefits. Mid-year corrections for stale caps create excess-deferral cleanup.

Email the workforce with the portal login URL, support contact, and a reminder of the electronic-delivery consent on file. Employees who never opted in to electronic-only get paper W-2s mailed by Jan 31 — confirm the print-and-mail vendor has the file and address corrections before this announcement goes out.

Direct reminder to employees who claimed exempt last year: a fresh W-4 is required by Feb 15 to maintain exempt status. Include a link to the IRS Tax Withholding Estimator for employees who experienced large refunds or balances due — adjusting now beats a surprise next April.

Communicate the new IRS limits — 401(k) deferral, age-50 catch-up, SECURE 2.0 ages 60–63 enhanced catch-up, HSA, FSA, and commuter. Coordinate with the benefits team if elections need to be re-confirmed for employees who were maxing out under last year's caps.

Final review by the controller and CFO. Confirm all federal and state filings transmitted with acceptance acknowledgments, employee and contractor distributions complete, and reconciliation workpapers archived. Lock the prior-year payroll periods in the system to prevent retroactive edits.