Preparing for Year End
Thanksgiving marks the beginning of the holiday season and the rush towards year end. The following weeks will be filled with holiday parties, Secret Santa gift exchanges, feasting with family and friends, and work deadlines. It's also time to start wrapping up payroll to prepare for Form W-2 printing in January. Below are some items to consider over the next four weeks.
Holiday Closures: All banks and Payroll On Time will be closed
Thursday, November 22nd for Thanksgiving Day
Tuesday, December 25th for Christmas Day
Tuesday, January 1st for New Year's Day
If your normal check date falls on one of these days, we recommend dating checks for the business day before. Otherwise, direct deposits will go into employee accounts the following business day.
SUI Rate Notices: Beginning the first week of November, states start sending unemployment tax rate notices for the new year. It is important to send these notices to your payroll processor to ensure the correct unemployment taxes are collected each pay period.
Bonuses: Year end is the last time to ensure all bonuses paid through the year have been reported on payroll. All funds paid to an employee, including cash bonuses, are taxable income and need to be reported on the employee's Form W-2 at the end of the year. Gift cards are considered cash and must also be included in employee taxable wages. Employers can opt to pay the taxes on these bonuses by grossing up from the net amount the employee received.
Non-Cash Fringe Benefits: As with bonuses, year end is the time to reconcile and report all non-cash fringe benefits, such as personal use of the company car and S-Corp shareholder health insurance. These "perks" are considered taxable and need to be reported on Form W-2. Consult your CPA to determine the value of the benefit and report that amount to your payroll processor prior to your last payroll of the year. For a detailed list of fringe benefits to consider, we recommend reading IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits.
Employer Cost of Health Insurance: Employers who issued 250 or more Forms W-2 in the previous calendar year must report the employer's cost of health insurance for each employee on the current year's Forms W-2. These amounts need to be provided to your payroll processor prior to your last payroll of the year.
Affordable Care Act (ACA) Reporting: Year end is an ideal time to put together the information your payroll processor will need to prepare Forms 1095 for your employees. Your payroll processor will need to know which employees were eligible for health insurance coverage and when they became eligible. They will also need a list of all eligible employees who waived coverage. If this is your first year producing Forms 1095, you will also need to identify your company's measurement period, administrative period, and stability period. For more information about ACA Compliance and Forms 1095, visit the IRS' ACA page for employers.