If you have been thinking about which is better, to outsource your year end payroll taxes and payroll close or do it in-house with a payroll automation software, we can help you answer that.
1. Check list of tasks with dates
All you need to manage the year end close is a list of tasks that you need complete in a timely manner. With a proper payroll solution, you can easily have notifications to help you along this process. These notifications can be via emails or messages with to do lists on your dashboard.
In October , the prep work begins. You need to run mock W2 forms to make sure they reconcile with your 941s. Check to make sure there are no negative amounts in the W2 boxes. You also need to check that your employee social security information are verified and accurate. You need to aware of Social security wage base and pension plan limit announcements
2. Collaboration with your employees and team is key over the next few months as the year winds down
Meet with the Finance departments to check non cash items that are taxable and may be recorded in finance but not in the payroll solution. Calculate imputed income and gross up amounts into the pay cycle in November and December under the Special accounting rule Identify any withholding changes for the upcoming year and communicate that to the employees impacted. Compute any year end bonus and run additional payrolls to pay the employees
3. Benefit changes and policy changes
If there are any benefit changes for your company, that needs to be communicated proactively to your employees. You need to check that these policy changes are updated in both the payroll software tables and the benefit providers software.
4. Year end reporting
You may need to develop unique year end reports depending on situations that have been identified during the year The W4 information for the new year can change for some employees. You need to get this information into the payroll software so that the new year withholding starts out right. Communicate with your employees and find out if any W4 information needs to be updated for the new year If you use a third party to file your unemployment , you need to update them of any rate changes for the new year.
5. Communication to employees in the new yearYou can wish your employees a happy new year and communicate any changes to the Social Security wage base, 401(k) limits, tax rates etc. withholding, etc. 2020 Form W-4 is required for all new hires and for employees who need to make adjustments File W2 , Form 941 , Form 940 , Form 941 Schedule D if there were any mergers or acquisitions in the prior year.(FUTA) Tax Return, on same schedule as fourth-quarter Form 941 February is a big month for submission deadlines for the forms. Verify with service providers for filing of all returns , prior year returns are filed in a timely manner. Notify employees about claiming exempt for income tax withholding : the status deadline is generally mid February
6. Celebrate the successful end of year close
Run all the reports and have a debriefing with all the team members to get feedback on the payroll process.