And the very first filings that have to be done are the quarterly returns for the last quarter of last year. You also need to prepare and distribute W-2s and 1099s. Before you start preparing these forms you need to get a few ducks in a row (Hi Trish!).
So here are 5 things you need to do before you get to printing.
- Verify independent and subcontractor records are accurate and up to date. I cannot tell you how many times I have sat down with a client to prepare 1099s only to find that we are missing either the address or social security number or both. Or the 1099s are sent out and one or two are returned because of an incorrect address. Or even worse, a notice is received from the IRS stating that the social security number on the 1099 does not match their records. Can you say audit? If you haven’t already taken the time in December to verify that you have all of this information and that the information is correct, then do it NOW! Right now. Do not pass go and do not collect $200. And going forward, implement a system that will ensure you have all of this information, and verified it BEFORE they start working for you.
- Update new state unemployment rate. Every year the state decides that they want you to pay a higher or lower unemployment insurance rate based on a number of different factors. Some factors includes how many employees you have, how large your payroll is and how many claims have been filed against your company. Be sure to go into your payroll system and change the rate to your new rate, or send the letter with the new rate to your outsourced payroll company, BEFORE you run your first payroll of the year. This will ensure that you pay the proper amount of insurance tax during the year.
- Verify / confirm unemployment insurance is calculating for the correct state. If you are a multi-state employer, this is very important so be sure you know the rules. There may come a time when you have to shift some people around from an office location in one jurisdiction to another office location in a completely different location. This occurs a lot in areas that are considered tri-state areas such as the DMV. (Not to be confused with the Department of Motor Vehicle). If these are temporary projects than no need to make the change. But if your company has an office in Virginia and another one in the District of Columbia for example, and an employee switches offices as their primary work location, you will need to update their payroll forms accordingly.
- Verify / confirm unemployment insurance is calculating for the state they work in – not live in. Now again make sure you know the rules. Unemployment insurance is paid based on the state that an employee WORKS in not LIVES in; unless they are one in the same. So if you have on-boarded a lot of people this past year, an you admittingly know your HR systems are not trump tight, you may want to go back and make sure that each employee is correctly coded for unemployment insurance to the state your office is located and not their resident state.
- Verify employee records are accurate and up to date. Just like I mentioned about for independent contractors, you need to ensure that you have correct information for your employees as well. And implement a system to make certain you have this information before they began working. Because people move all the time and forget to change their address with their employer, until they need to file taxes. So send out a friendly email reminder to your staff to make sure they have updated any changed personal information with your HR department.
What year-end payroll tips can you share? What snafoos have occured and the lessons learned that you wish you would have known about before hand?
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