Year-End Payroll Tips for Small Business Owners

Wrap up presents, and your year-end payroll with these end-of-year and new-year payroll tasks.

Business owner running the last payroll of the year, writing notes, busy on phone, and working on laptop in his store.
Author By the Roll Editorial Team on November 06, 2023
Reading Time 4 min read

While visions of sugar plum fairies might dance in your head around this time of year, if you're a business owner, juggling the demands for seasonal fun and critical year-end tasks is essential.

Believe it or not, year-end is an essential time to button up your business' payroll because it:

  • Promotes accurate payroll reports to stay compliant with local and federal payroll regulations
  • Ensures accurate reporting in the coming year
  • Sets up upcoming small business tax prep when the filing season opens in late January

You can do many things in December (and January) to ensure a clean exit in the current year and tee up the following! Read on as we weigh in on the details…

Make a List and Check it Twice

Wrap up presents – and your year-end payroll! We've separated the tasks into end-of-year and new-year payroll tasks. Pay attention to each of the following.

End-of-Year Payroll Tips and Tasks

Prior to the last payroll of the calendar year…

1. Make sure you've collected all the critical payroll documents and forms. If you're using an app-based solution like Roll, it will be easy as it's all available in the app – at the swipe of a button.

2. Make and account for special payments. If you're feeling festive and give your employee bonuses, an extra payroll payment, or made an extraneous payment at some point in the year, make sure it's accounted for.

If you somehow paid an employee via paper check during the year, ensure these manual checks are reported in your system. And, if there are voided or reversed paychecks in the system, ensure they are tallied.

3. Double-check employee and employer data. Ensure the employee data used to process your tax reports (like W-2s and 941s) are accurate. This includes ensuring the accuracy of employee names, Social Security numbers, current addresses, and other contact information. And if an employee left the company, there's a special payroll code – so make sure it's properly documented. Staying compliant with this step will help you avoid penalties in the future. (Plus, your employees' information will be nice and neat in the coming year!)

4. Remind employees to complete a new Form W-4 if their situation has changed. Welcoming a new member to the family, marriage, or even an address change would prompt an employee to complete a new form.

5. Run a final payroll. Give employees their last check of the year before December 31!

6. Review wage, tax, and benefits data. After you run a final payroll, double-check that all data is properly reported. Each employee will likely have a different compensation plan – not just limited to wages; it includes sick pay, tip allocation, life insurance, taxable fringe benefits, bonuses, non-cash payments, and other benefits. This information factors into the total taxable wage reported on your upcoming small business tax return, so it must be right!

New Year Payroll Tips and Tasks

Once the new year begins, there will be more payroll to-dos. Some tasks carry over from the previous year, and others are new.

1. Account for new tax rate changes. Suppose you're doing payroll the old-fashioned way. In that case, you have to manually factor in the new tax rates for the employer portion of FICA taxes (Social Security and Medicare), disability insurance, and payments for the tax year. If you're using a solution like Roll by ADP, the rates are automatically updated, so no action is necessary as a small business owner.

2. Disperse necessary employee tax forms. Each January, you should create and distribute W-2 Forms by January 31. You should also submit Form W-3 to the IRS by this date. Send complementary state forms to your respective state's revenue department as well. Before you submit the forms, compare payroll register totals to Form W-3 total, Form W-2 to state and local report totals, and total wages reported for each tax. If you see any errors, reconcile the differences.

3. Deposit and report FUTA taxes. Paying Federal Unemployment Tax Act, or FUTA is a requirement for all U.S. businesses that employ someone who receives more than $1,500 in wages to employees (other than farm workers or household workers) in any calendar quarter during the year or works 20 weeks during the year.

And a new year brings the responsibility to report unemployment payment information to the federal government. To this end, you should make sure that all federal income generated from the previous tax year is reported and sent to the IRS via Form 940.

4. Deposit FICA taxes for the previous year. File quarterly via Form 941 or annually via Form 944. Both forms are due January 31.

Help is Just a Swipe Away

All the tasks listed above are more manageable with one tool – Roll by ADP. Take the worry out of all payroll tasks, including unlimited payroll, small business tax prep and filing/deposits, and other time-saving features.

With this solution, you get the expertise and reliability of the biggest name in payroll right in your pocket.

Read more about payroll and how Roll can help.

Small Business Payroll • Business Basics • Small Business • Technology • Payroll
Free Trial

Free Trial

Sign up today and enjoy a three-month free trial.