10 Steps to Year-End Payroll

PAYROLL GUIDE

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Time is running out to close out your payroll for the year—but if you start now, you’ll be able to achieve year-end success.

Get on track, avoid extra work, and have peace of mind with this 10-step guide:

This year, the ACA is requiring small employers with self-insured health

plans and employers with 50 or more full-time (or full-time equivalent)

employees to report health coverage information to the IRS and to

employees. Follow our handy ACA Reporting Road Map to learn more

about your updated responsibilities.

STEP 2

STEP 1

Understand the Affordable Care Act (ACA) changes, and prepare.

Understand the Fair Labor Standards Act (FLSA) changes, and prepare.

The Department of Labor is making important updates to the FLSA. If federal

approval is granted, the minimum yearly salary requirement for overtime-exempt

employees will increase from $23,660 to $47,476.

During the currently uncertain federal review period, consider seeking legal

counsel to discuss possible next steps for your business. If applicable, plan to

either increase your employees’ salaries or to pay overtime. Stay up-to- date on

crucial FLSA developments at ADP’s FLSA page.

10 Steps to Year-End Payroll

The IRS issued 6.8 million penalties totaling $4.5 billion related to payroll employment taxes in 2013.*

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It’s important to review and confirm basic business

information, such as your tax ID number and

company email address. Although this information

may seem like a no-brainer, mistakes can happen.

For instance, W-2s are mailed to your company’s

shipping address—if your legal business address

is different and you forget to update your account,

you won’t receive your W-2s on time. Double

check these items with laser precision now to

avoid unnecessary hassle later.

STEP 4

STEP 3

Review and verify company information.

Understand the Federal Unemployment Tax Act (FUTA) changes, and prepare.

Certain states are now subject to FUTA credit reduction, meaning that

businesses in these states will need to pay higher FUTA taxes per employee.

Find out if your business will be subject to higher taxes under the 2016

provisions here, and budget accordingly.

Communicate.Certain departments—such as HR, finance, and IT—may affect the creation and distribution W-2 forms. Coordinate your year-end payroll

processing with relevant teams accordingly.

Make a timeline.Create a timeline for the first payroll of the new year and the last payroll of the previous year. Plan ahead for interim payroll to prevent

payment delays.

Update your software.Make sure you’ve installed the most recent updates to your payroll software—this will make it easier for you to take recent changes into account

while wrapping up your year-end payroll.

Bonus Points Quick List

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Begin reviewing your employees’ year-to-date earnings and deductions in your

reports, and confirm those amounts. Don’t forget to account for both current

and former employees.

STEP 7

Review and verify earnings and deductions.

Be sure to double check employee and contractor information, such as SSNs

and 1099s. It might be easy to lose track of which employees have moved or

gotten married this year.

Do yourself—and your employees—a favor, and devote the necessary time to

confirming these details, and prevent easy-to-avoid mistakes.

STEP 5

Review and verify employee information.

STEP 6

Check your employee totals.

Before your last scheduled payroll for the quarter, make sure to update any

employee totals—such as PTO and retirement plans—that you want to include

in the quarter balances. Before December 31, in the fourth quarter, you must

update any missing employee totals and run any bonus payrolls. If you miss the

deadline and have to run a special payroll, the government may charge you

penalties and interest.

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* Source: Bloomberghttp://www.bloomberg.com/news/articles/2014-04-08/small-business-owners-have-a-4-dot-5-billion-payroll-tax-problem

STEP 10

Christmas may affect payroll processing—plan ahead.

Christmas Day is Sunday, December 25, 2016, and the federal holiday will be

observed the following day. Does your payroll schedule coincide with Monday,

December 26? If so, be aware that payrolls won’t be delivered that day.

Payrolls processed on Friday, December 23, will be delivered Tuesday,

December 27, and payrolls processed Christmas weekend will be delivered

Wednesday, December 28. Prepare your payroll processing accordingly to

avoid delays.

Fringe benefits are forms of compensation provided to employees, including

company-provided vehicles and gym memberships—and they’re taxable. If

this type of benefit is applicable to your business, it must be included in your

employees’ pay and reported on employees’ W-2s, unless otherwise specified

by the law. Not sure if you provide fringe benefits? Check out this list.

STEP 9

Review and report fringe benefits.

Federal law requires businesses to report taxable and non-taxable sick

payments made to employees from a third party. This includes any taxes

withheld on those payments. If the third party does not report sick pay, your

organization must report this information on your employees’ W-2s no later than

January 1, 2017.

If applicable, it’s important to obtain this information ASAP, and then to process

these entries on or before your last payroll of the year. Otherwise, your Form

941 and W-2s will not be accurate.

STEP 8

Review and report third-party sick pay.

Want to learn more about ADP’s expertise on year-end payroll?

Talk to one of our well-informed representatives at 1-800-225-5237 or visit www.adp.com/payroll.