Making a checklist can change your year-end payroll task from daunting to manageable. A checklist lays out the steps you need to follow in a logical time sequence. The bedrock of your payroll year-end checklist is verifying the accuracy of your employee payroll information. Your employees depend on having enough money withheld from their paychecks to pay their federal income tax obligation. Using a checklist and allowing adequate preparation time ensures that your year-end payroll tasks are completed timely and accurately.

 

Have your employees review their current Internal Revenue Service Form W-4, Employee's Withholding Allowance Certificate, to verify that the information is correct. If their life situation has changed, have them complete a new W-4 with their current information. Verify that the W-4 information for your former employees was entered into your payroll system accurately. Compare the information on the W-4s to your payroll records and verify both are the same. Update your employee's information so that your payroll information is current.

 

Reconcile your payroll account before running your final payroll. Look for outstanding checks that are older than three months. If you find one, contact the employee and find out why the check has not been cashed. If your employee lost or misplaced the check, have the bank put a stop payment on it and reissue the check. Account for any checks that were lost or voided by the payroll department. Make all the changes and adjustments needed to the payroll account before running your year-end payroll.

 

You must file IRS Form 941, Employer's Quarterly Federal Tax Return, and Form 940, Employer's Annual Federal Unemployment Tax Return, by Jan. 31 of the next tax year. Before filing, review your 941s for the previous three quarters to check that you reported and paid your withholding tax correctly. Make any corrections on the fourth-quarter Form 941. The IRS will compute your tax liability and inform you if you have underpaid or overpaid your payroll taxes. If your state imposes a personal income tax, you must submit your state payroll forms by the required deadline.

 

You must provide a W-2, Wage and Tax Statement, for the employees who worked for you during the calendar year by Jan. 31. You must also file Form W-2 and Form W-3, Transmittal of Income and Tax Statements, with the Social Security Administration. The W-2 must contain the employee's correct address and Social Security number and the amounts withheld for federal income taxes, Social Security and Medicare taxes. The deadline to file your W-3 and W-2 electronically is the last day of March. If you file paper W-3 and W-2 documents, the filing deadline is the last day of February.