The end of the year is here. That means it is time to get your clients’ payroll accounts in order. Depending on how organized you and your clients’ were this year, things could get hectic.
There are certain tasks that you have to do. If some tasks are not done (or are done incorrectly) your clients could be penalized.
Wrapping up payroll can be stressful, but it does not have to be. Here are things you and your clients can do to close payroll this year and to get ready for next year.
Order Forms W-2 and W-3. Either you or your client will need to order Forms W-2 and W-3. You can get these forms from the IRS or from a private supplier. Your client will need a Form W-2 and Form W-3 for every employee that they paid during the year.
You may also want to order some copies of Form W-2c to have on hand. Ideally, your client will not need Form W-2c. However, if there are errors on any Form W-2s, your client will need Form W-2c to make corrections.
Check employee information. Employee information goes on Forms W-2 and W-3. This information includes names, Social Security numbers, and current addresses. Having correct information for every employee is important. Fixing and sending out corrected forms can be time-consuming.
Have your clients make sure all employee information is accurate. If any employees made a life change (such as getting married), he or she should have indicated the change by filling out a new Form W-4. Encourage your clients to make sure employee information is errorless throughout the year. This will help prevent a last-minute scramble.
Verify employee wages. Make sure the total wages for every employee are correct. If your client issued cash wages or handwritten checks, yous should include those wages in the total paid wages. If your client voided any paychecks, make sure to record those as well.
Determine special end-of-year wages. If an employee will receive a year-end bonus, you need to document it in payroll. The same thing is true if a client buys back unused benefits. Talk to your clients about any special wages they plan to offer at the end of the year. Then, make sure to document these wages and include them on all forms.
Update employee benefits. Remind your clients to talk to their employees about fringe benefits. You and your clients should finalize any benefit changes that will take place in the new year. Your clients should notify employees of changes.
Fill out Forms W-2 and W-3. Either you or your client will need to fill out a Form W-2 and Form W-3 for every employee. These forms should state the total amount each employee was paid during the year, along with how much was withheld from his or her wages.
Once you fill out these forms, you need to send them out. Employees should receive Form W-2 by February 1, 2016. The Social Security Administration should receive Forms W-2 and W-3 by February 29, 2016.
Lookup next year’s payroll deadlines. Mark down next year’s payroll deadlines now. Provide your clients with the payroll deadline information too. This will help you and your clients stay on top of due dates and avoid late penalties. You may also want to mark down when to send deadline reminders to clients.
Remember, your clients might not all have the same deadlines. The IRS and other organizations have varying deadline frequencies. Make sure you are aware of each client’s payroll deadlines.
Double check tax rates. Tax rates periodically change. Make sure your clients’ tax rates are up to date. Using incorrect rates could result in penalties for your clients.
Brush up on payroll laws. Make sure you stay current; laws are constantly changing. You do not want to cause penalties for your clients. Find out if any laws have changed. For example, double check minimum wages. Also, find out how evolving health care laws affect your clients.
Talk to your clients about next year. Ask your clients about their plans for next year. Is a client planning to hire several new employees next year? Or is a client adjusting wages and offering new benefits? These changes could affect how you serve your client next year.
More help for you and your clients
Wrapping up payroll does not have to be difficult. By following the steps above, finishing payroll can be much easier. And, you and your clients will be prepared to start next year’s payroll.
Patriot Software, Inc., has a downloadable 2015 End-of-Year Payroll checklist. You can use this free resource for yourself, or you can give it to your clients to check off each completed task.
Mike Kappel
Mike Kappel is the CEO of Patriot Software, Inc., a developer of online accounting and payroll
software for small business owners in the USA. Being a serial entrepreneur, Mike