2024 Year-End Payroll Checklist: Avoid Pitfalls & Ensure Compliance with BMA Payroll
As we approach the end of 2024, businesses face one of their most crucial payroll periods. Year-end payroll processing requires careful attention to detail and thorough preparation to ensure compliance and accuracy. Even small oversights can lead to significant issues with tax authorities, unhappy employees, or costly penalties.
While many business owners view year-end payroll as overwhelming, breaking it down into manageable steps can make the process smoother and more efficient. Let’s explore the essential tasks that must be completed and common pitfalls that could be costly if not navigated correctly.
Your First Critical Step: Employee Information Verification
Start with what seems basic but often causes the biggest headaches: employee information verification. Completing this step can prevent numerous issues, particularly when distributing W-2s and other tax documents.
Key Items to Verify:
- Current mailing addresses
- Social Security numbers
- Legal names
- Tax withholding elections
- State and local tax jurisdictions
Common Mistake: The “Set It and Forget It” Approach
Many employers assume employee information remains static throughout the year. However, we frequently see cases where employees move or have life changes affecting their tax status without properly updating their information. This leads to returned W-2s, delayed tax filings, and frustrated employees.
Pro Tip: Create a formal verification process by sending each employee a detailed information sheet to review in early December. This proactive approach catches changes before they become problems during the tax season rush.
Earnings and Deductions Review: Double-Check Everything
A thorough review of all payments and deductions is crucial for accurate year-end reporting. This step often reveals discrepancies that could affect tax calculations and employee W-2s.
Critical Areas to Review:
- Regular wages and overtime
- Bonuses and commissions
- Fringe benefits
- Health insurance premiums
- Retirement contributions
- Garnishments
Common Mistake: Missing Special Payments
We often see businesses overlook one-time payments or taxable fringe benefits when reconciling year-end totals. This includes items like employee achievement awards, holiday bonuses, or personal use of company vehicles.
Pro Tip: Create a separate checklist for special payments and benefits, including their tax treatment. Review this against payroll records monthly rather than waiting until year-end.
Tax Compliance and Reporting
Ensuring tax compliance is perhaps the most critical year-end task. This includes verifying correct tax calculations and preparing for all required filings.
Key Focus Areas:
- Federal, state, and local tax withholdings
- Social Security and Medicare contributions
- Unemployment taxes
- Third-party sick pay
- Fringe benefit taxation
Common Mistake: Incorrect Tax Treatment of Benefits
Many businesses miscalculate taxable benefits or apply incorrect tax rates to supplemental wages. This can result in under-withholding and potential penalties.
Pro Tip: Conduct a quarterly review of tax rates and withholdings to catch discrepancies early. This prevents last-minute surprises and allows time for corrections.
Looking Ahead to 2025
While completing 2024 tasks, it’s essential to prepare for the new year. This includes reviewing upcoming changes that might affect your payroll.
Key Considerations:
- New tax rates and wage bases
- Updated minimum wage requirements
- Changes in benefit plans
- Modified overtime rules
- New state and local regulations
Ready for Year-End Success?
Completing these year-end tasks accurately requires attention to detail and expertise in payroll regulations. While this checklist provides a framework, many businesses find that professional payroll support ensures accuracy and compliance while saving valuable time.
At BMA Payroll, we specialize in making year-end processing smooth and worry-free for business owners. Our expert team handles these critical tasks while you focus on running your business.
Contact us today for a free consultation on how we can help you close out 2024 successfully and prepare for a strong start to 2025.
