With just seven weeks to go, we want to focus on year-end payroll processing reminders for 2020. 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 2020.
- 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 31, 2020
- 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 31, 2020
- 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 2020 payrolls to avoid penalties and interest charges
- Holiday Impacts – Christmas Day is Friday, December 25 and New Year’s Day is Friday, January 1. If your check dates fall on either of these dates, you should adjust them to avoid delaying your employees’ payroll checks/direct deposits.
As always if you need assistance or have questions about this list of year-end payroll processing reminders for 2020 or any other questions regarding your accounting and tax needs, please contact us at any time. We are available to speak with you by phone at 215-675-8364.
DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are intended to provide general information on 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.