Note: The following article includes excerpts from our previous blog titled, Year-End Checklist: What to Do Before & After the New Year.
Feel Organized and Confident in 2022
Welcoming the new year may still feel a little different than in prior years. But while the gatherings and celebrations may be a little smaller, it doesn’t mean that your year-end business to-do list will be, too.
Many notable business deadlines occur on December 31st or shortly after, and keeping track of them all can be a daunting task. Here is an update to our annual post: Year-End Checklist: What to Do Before & After the New Year.
To-Do Before December 31
This list of planning tips prior to December 31 should provide some ease to ensure you are entering the new year with confidence:
1. Review employee and contractor information for accuracy
To save you from potential stress in the subsequent processing of tax forms, be sure to review all your current employee and contractor information. While it’s important to check all employee data for accuracy, the following details should be your top priority:
- Social Security number
- Correct spelling of names
- Up-to-date name changes
- Accurate tax ID numbers for independent contractors
- Local tax rates and configurations
Note: For contractors, you must verify the person's tax ID number, which can be found on Form W-9.
2. Employee end-of-year communication
While you can find most of your employee information through double-checking W-2, W-9, and 1099 Forms, if you are unsure of any of the data, verify it directly with your employee. Be sure to let your employees know that they need to make you aware of any changes made to address, name changes, marital status, or other important information in their records. This is also a great time to communicate any pay date changes that may occur due to the holiday season as well as any compensation or benefits changes that will take effect on the first day of the new year.
3. Third-party payouts for disability claims
If you have had any third-party payouts for disability payments, make sure everything is reported to your payroll team, as those amounts must be reported on tax returns and W-2 documents. Timeliness and consistency are both essential for maintaining compliance and balancing the books.
4. Submitting year-end payroll
Be mindful of federal holidays and business closures as year-end approaches. Keep an eye out for any communications sent from your payroll team regarding cutoffs for submitting payroll around these holidays.
5. Special circumstance for fringe benefits
Fringe benefits — stock options, employee discounts or bonuses, commuter benefits, or moving expenses, for example — should be submitted to your payroll team no later than your last scheduled payroll of the year. As an example, for the year 2021, fringe benefits should be submitted no later than your last scheduled 2021 payroll (with a check date in 2021).
6. Invoice clean-up and preparation
December is a great time to clean up accounting-related procedures, so when the new year launches, you will be in a good position. Make sure to run records to clear up any irregularities of outstanding bills or open invoices. Also, remove unused or closed accounts and clear any deposited funds.
To-do After January 1
You have your year-end tasks completed, but what now? Some year-end duties will be carried out in the new year. Here are a few of the key responsibilities you’ll want to jump on as early as possible in the new year:
1. File year-end payroll tax returns
The IRS provides all reporting due dates for employment taxes here. Below are filings due January 31 of each year:
- Form 940, Employer’s Annual Federal Unemployment Tax (FUTA) Return.
- IRS Form 941, Employer’s Quarterly Federal Tax Return. Check the previous quarter Forms 941 to ensure that you have correctly reported and charged the withholding tax.
- State personal income taxes, but these may differ by state.
Be sure to check the requirements of your state if it imposed a personal income tax since you are also required to submit forms of state payroll by the appropriate deadline.
The IRS provides reporting due dates for employment taxes here.
2. Reviewing reporting requirements for the Affordable Care Act (ACA)
In a previous blog, we covered the history and basic requirements of the employer mandate under the ACA. The IRS has published its 2021 draft of instructions for Forms 1094 and 1095 which will help you prepare for ACA reporting. Forms 1094 and 1095 are due by February 28, 2022, if you file on paper, or March 31, 2022, if you report electronically.
Note: Insurance carriers typically file Forms 1094-B and 1095-B, while ALEs file Forms 1094-C and 1095-C. If you are a self-insured employer (e.g., small employer with a self-insured group health plan), you may need to file Forms 1094-B and 1095-B.
Regulations generally require that Forms 1095-B and 1095-C be furnished to individuals by January 31st, however, recent guidance extends this deadline by 30 days (March 2, 2022).
Learn more about our ACA Compliance Navigator.
3. Distribute W-2s to employees
In a previous blog, we explained that Form W-2, Wage and Tax Statement, shows the income and taxes withheld from an employee's pay for the year and is required to file their taxes. By law, you must provide Copies B, C, and 2 of Form W-2 to your employees by January 31.
4. Send out 1099 forms to independent contractors
As of tax year 2020, Form 1099-MISC is no longer used for income. In 2020 the IRS introduced Form 1099-NEC for reporting non-employee compensation. A redesigned Form 1099-MISC will continue to be used for other payments. As you’ll recall in a previous blog, we explained that Form 1099-MISC is the independent contractor version of a Form W-9 and must be filled out by the employer and provided to the individual or entity by January 31.
5. Check state-by-state minimum wage increases
It’s important to keep an eye out for anything that can affect your employee’s pay. State minimum wage increases are provided by the Department of Labor (DOL) and can also be found on your state’s government site.
Don’t forget FSA funds
FSA accounts are a fantastic way to help employees manage annual medical spending and reduce surprise out-of-pocket expenses. But United States U.S. workers leave nearly $400 million in FSA funds unspent each year and unless you offer employees an extension to the December 31st deadline there is no recovering that money. Before you close out 2021 check out our recent blog on how to use unspent funds before the end of the year and encourage your employees to check their account balances.
Year-end solutions to start the new year
Now you’ve gone through your to-do list and checked it twice, it’s time to rest easy knowing you are on track and your employee information is updated. Have a great new year!
Click here to see how PrimePay’s comprehensive payroll, benefits, and HR administration solutions can help you improve efficiency, compliance, and marketplace competitiveness by relieving administrative burdens on your HR and leadership teams.
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