PAYROLL GUIDE. 10 Steps to Year-End Payroll

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1 PAYROLL GUIDE 10 Steps to Year-End Payroll

2 2 10 Steps to Year-End Payroll 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: STEP 1 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. The IRS issued 6.8 million penalties totaling $4.5 billion related to payroll employment taxes in * STEP 2 Understand the Affordable Care Act (ACA) changes, and prepare. 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.

3 3 STEP 3 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. STEP 4 Review and verify company information. Bonus Points Quick List It s important to review and confirm basic business information, such as your tax ID number and company 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. 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.

4 4 STEP 5 Review and verify employee information. 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 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. STEP 7 Review and verify earnings and deductions. 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.

5 5 STEP 8 Review and report third-party sick pay. 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, 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 9 Review and report fringe benefits. 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 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. * Source: Bloomberg Want to learn more about ADP s expertise on year-end payroll? Talk to one of our well-informed representatives at or visit