Year-End Payroll Processing Reminders for 2024

With the final weeks of 2024 fast approaching we would like to offer the following reminders to help reduce or eliminate errors while you complete year-end payroll processing.

Year-end Payroll Processing Checklist

1. Make certain all personal information is up-to-date and correct for each employee
2. If 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 your final payroll in December 2024
3. Third Party Sick Pay: If you have employees who received sick pay from a third party (insurance company), be sure that these wages have been properly reported and the required taxes paid before you file your 4^th quarter 941, annual 940 and W-2’s.  You are responsible for remitting the employer portion of the FICA/Medicare taxes on third party sick wages
4. Review your paid time off (PTO) policy to determine any unused PTO that needs to be paid to employees before year-end. Consider doing the same for FSA/HSAs, if provided.
5. Be sure that you have up-to-date W-9’s for subcontractors and vendors who will receive a 1099 from your business
6. 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, including stock options
   • Health care premiums– Employers with over 250 employees must report the total cost of employer-sponsored health care coverage
   • Partial Tuition reimbursement
7. Remind employees to fill out a new Form W-4 if their situation has changed
8. Check for excess retirement contributions to 401(k), 403(b), or SIMPLE retirement plans as they cannot exceed IRS limits – not all payroll systems will automatically turn these off after the maximum allowable amount is contributed.
9. 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
10. Check with your payroll provider to find out the last day you can submit final 2024 payrolls to avoid penalty and interest charges
11. Update Payroll Information for the New Year: Before running your first payroll of 2025, be sure to account for any changes such as new tax rates and annual wage limits, revised minimum wage rates, etc.

Holiday Impacts

If your check date falls on either of the following dates, you should adjust it to avoid delaying your employees’ payroll checks/direct deposits:

• Christmas Day: Wednesday, December 25, 2024
• New Year’s Day: Wednesday, January 1, 2025

Additional Year-End Information

In case you missed any of our year-end tax planning articles for businesses or individuals, below are links to those articles.

2024 Year-End Tax Planning – Businesses

2024 Year-End Tax Planning – Individuals

Questions?

Should you have questions about year-end payroll processing, 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.

Julie Shennard and Samuel Leslie Mathew contributed to this article.