Year-End Payroll Checklist: Wrapping Up the Year Like a Pro

As 2024 winds down, it’s time to tackle year-end payroll tasks and ensure your business is prepped for a smooth transition into the new year. At Everything Counts LLC, we know this process can feel overwhelming, so we’re breaking it down into manageable steps with our payroll checklist. Let’s make sure your payroll is buttoned up and ready for 2025!

1. Review Key Deadlines

Time is of the essence! Here are critical dates to circle on your calendar:

• December 31, 2024: Final date to process payroll adjustments, manual checks, and voided checks for 2024.
• If you use a payroll service, be sure to work within their guidelines and due dates. Your best bet is to have any adjustments ready to go with the last regularly scheduled payroll run in December. 
• Missing this deadline could mean late tax payments or penalties, so plan ahead.

2. Audit Employee Records

Accurate W-2s are non-negotiable! Take time to verify employee details:

• Confirm Social Security Numbers, legal names, and current addresses.
• Update any changes in your payroll system before year-end. Again, be sure you comply with any deadlines provided by your payroll service. 
• A small error here could lead to IRS penalties, so let’s double-check!

3. Handle Fringe Benefits

Do you offer perks like group-term life insurance, company cars, or shareholder health insurance? These need to be reported:

• Identify benefits subject to withholding, such as personal auto use or third-party sick pay.
• Identify medical insurance costs for Scorp shareholders and don’t forget to include premiums paid for any dependents or family coverage. Read more on this here.
• Determine if you need to make any adjustments for group-term life coverages. Read more on this here.
• Process these during your normal payroll runs to ensure taxes are withheld properly.

4. Plan for Bonuses

Bonuses are a great way to reward your team but require special handling:

• Bonuses must be run through payroll and reported on W-2s. You cannot simply write checks to employees.
• You can run bonuses as a separate payroll or add them to a regularly scheduled payroll.
• If you want to give your employees manual checks then run as a separate payroll and block direct deposit.

5. Prepare for ACA Reporting (if applicable)

• If you’re a large employer (over 250 W-2s), don’t forget to report employer-sponsored healthcare on employees’ W-2s with Code DD. 
• Verify these amounts and make corrections before year-end to avoid reprinting or amendments.

6. Tidy Up Tax Records

Ensure you’re ready for tax season by keeping your records in order:

• Forward updated unemployment rates and tax filing frequencies to your payroll provider or update them in your system to prepare for the next year.
• Late updates can result in penalties, so stay proactive.

7. Preview Your W-2s

Take a look at your W-2 forms:

• Review amounts in Box 12 (healthcare costs, fringe benefits, etc.) and confirm accuracy.
• Confirm employee names, addresses, and SSNs are shown correctly.

8. Communicate with Your Team

• Remind employees to update their W-4 forms for the new year if they’ve experienced major life changes.
• Those claiming exempt withholding must provide a new W-4 by February 15, 2025.

9. Look Ahead to 2025

• Check the calendar for federal holidays, bank closures and your own office closures that may affect payroll processing dates. Mark these dates on your calendar.
• Verify pay changes are ready to go in your payroll system for the new year.

10. Know your Minimum Wage Changes

• Check for any changes to your state or local minimum wage adjustments. If you are an Arizona employer, on January 1, 2025, the minimum wage rates in Arizona will increase as follows.
  • Statewide
    The minimum wage will increase to $14.70 per hour. The minimum base wage for tipped employees will increase to $11.70 per hour.
  • Flagstaff
    The minimum wage in Flagstaff will increase to $17.85 per hour. The minimum base wage for tipped employees will increase to $16.85 per hour.
  • Tucson
    The minimum wage in Tucson will increase to $15 per hour. The minimum base wage for tipped employees will increase to $12 per hour.

At EverythingCounts, we’re here to make accounting stress-free and understandable. By following this payroll checklist, you’ll glide through year-end payroll like a pro. If you need help or have questions, reach out—we love partnering with businesses like yours to make every detail count!

Cheers to a successful year-end and a strong start to 2025!