With just under three weeks to go, we want to focus on year-end payroll processing reminders for 2021. In the below list, we have included additional information for those businesses impacted by COVID-19 and received earnings from the Families First Coronavirus Response Act (FFCRA) or Coronavirus Aid, Relief, and Economic Security (CARES) Act. We have also included common W-2 adjustments.
As the year comes to a close, we hope the following information will help reduce or eliminate errors while you complete your year-end payroll processing for 2021.
- Make certain all information is up-to-date and correct for each employee
- If your business was impacted by COVID-19 and you need to record any Families First Coronavirus Response Act (FFCRA) or Coronavirus Aid, Relief, and Economic Security (CARES) Act earnings, you must do so before December 30, 2021. Keep in mind that December 31st is a holiday.
- If your payroll processing was disrupted by COVID-19, and you issued manual checks and/or voided checks, be sure your payroll information is up-to-date and correct in your software or with your third-party payroll provider before December 30, 2021. Again, keep in mind that December 31st is a holiday.
- Verify that all cash and non-cash income has been recorded and taxed properly. Common W-2 adjustments include:
- Group-term life insurance in excess of $50,000
- Employer-paid health insurance premiums for subchapter S shareholders who own at least 2% of the company
- Personal use of a company vehicle
- Third-party sick pay
- Company-provided transportation or parking
- Non-qualified moving expense reimbursements
- Non-accountable business expense reimbursements or allowances
- Bonuses and other annual incentive pay
- Employer-paid education not related to the employee’s job
- Non-cash payments
- Health care premiums– Employers with over 250 employees must report the total cost of employer-sponsored health care coverage
- Check for excess retirement contributions to 401(k), 403(b), or SIMPLE retirement plans as they cannot exceed IRS limits
- Start preparing for ACA Annual Reporting – Determine if your company had 50 or more full-time employees for form 1095 reporting:
- 50 or More Employees: Complete and file Forms 1095-C and 1094-C
- Less Than 50 Employees (Self-Insured): Complete and file Forms 1095-B and 1094-B
- Less Than 50 Employees (Fully Insured): The insurer is responsible for filing on behalf of the employer Less Than 50 Employees (No Insurance): Reporting is not required
- Check with your payroll provider to find out the last day you can submit final 2021 payrolls to avoid penalties and interest charges
- Holiday Impacts: If your check date falls on either of these dates, you should adjust it to avoid delaying your employees’ payroll checks/direct deposits
- Christmas Day is Saturday, December 25 but the holiday is recognized by the Federal Government on Friday, December 24th.
- New Year’s Day is Saturday January 1, 2022 and will be recognized by the Federal Government on Friday, December 31, 2021.
Should you have questions about this topic, or any other topics related to your personal or business situation, please contact us at any time.
DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update COVID-19, COVID-19 Business Resources, COVID-19 Client News Alerts and other related communications are intended to provide general information, including information regarding legislative COVID-19 relief measures, as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.
Ted Allavena, CPA contributed to this article.