It’s that time of year again…In between scrambling for last-minute Halloween costumes for your kids and getting warmer clothes out of storage, there’s one thing you shouldn’t wait until the last minute to do: think about year-end payroll preparation for your small business.

October is the time that I recommend business owners start getting organized with what they need to put together for year-end payroll. The sooner you get all of your information into your accountant or payroll processor, the less stress you’ll feel when the calendar hits 2016.

Below are some of the crucial things to consider:

Employee Data 

Now is the perfect time to examine all of your existing employee data. Proof your data for accuracy of details such as: addresses, birth dates, properly keyed Social Security numbers, correct spelling of names, up-to-date name changes, and accurate tax ID numbers for independent contractors. This will save you from any stress when it comes to handling tax forms later on.


Determine what type of adjustments you will be making to your payroll for the upcoming year. If you know you have a payroll that you’re going to be making a lot of adjustments on, maybe schedule it outside of the normal time. Did health insurance contributions change for your employees?  Consider sending changes as a spreadsheet to your payroll processor prior to your scheduled time. 


If you’re planning on doing any large bonuses at year-end, you’ll need to have some data on hand. Be prepared for these types of questions from your payroll provider or accountant:

Do you want to use the normal check date?

Are there going to be separate checks?

Do you need a separate journal?

How do you want the bonus checks taxed?

While having these taxed the “same as normal” appears to be the convenient option, it’s not always in your best interest. By leaving the tax calculation like your regular payroll, you could end up paying a lot more than you intend to. Look back at last year’s payroll journals to compare how you did it last year. You may want to consult your accountant, who could suggest a specific flat dollar amount or percentage.

Will the bonus checks be live checks or direct deposit?

Which deductions should be taken? (401(k), etc.)

Which checks will be given to the employees first?-Regular or bonus checks?


Are you going to be maxing out your personal 401(k)? Be sure to let your payroll processor know.

*Many retirement plan agreements state that the contributions should be calculated each time an employee is paid.  This includes bonus checks.  In order to remain in compliance with your plan, please consult your plan administrator prior to running the payroll.

S-Corp Insurance or Group Term Life Policies

Think about if you’re going to be recording any S-Corp insurance or if you have group term life policies that you’ll need to report for your employees. Please remember that these amounts will also need to be reported on any employees that were covered during the course of the year, including terminated employees.

Third Party Sick Pay

Make sure everything gets reported to your payroll provider if you’ve had any third party payouts for disability payments. These amounts must be reported on tax returns and Forms W-2, so timeliness and accuracy are crucial.

Affordable Care Act

With the Affordable Care Act, you want to make sure you know what the requirements are for this year and the next year going forward. Ensure you’re in compliance or whether you’re even subject. We have some great resources here to learn more about the requirements.

By getting this information in order in as much advance as possible, you’ll save yourself from hassle later on. (And your payroll provider or accountant will thank you too)!

To help you get prepared, we have a great host of resources at your disposal. 

Check out our calculator page to aid in 401(k) planning, salary paycheck calculations and more.


Shannon Peffer is the Manager of Service Training at PrimePay. Click here to learn more about her.