Payroll processing and year end reporting is a large and important task that must be done correctly to ensure compliance with federal, state, and industry requirements. It is also critical to ensure financial accuracy throughout the year.
A few small errors can cause significant problems. This includes even something as simple as a spelling mistake in an employee name, which can prevent the payroll platform from generating W-2 and W-3 documents.
Financial Closeout Process
Verify employee information: Correcting outdated or inaccurate employee information can help to streamline year-end processes and avoid costly delays or reprints of W-2 forms. Inaccuracies in an employee’s name, Social Security number or address can lead to IRS-imposed penalties.
During the closeout preview phase, you can identify items to carry forward and map. Performing this step during the fiscal year planning process for the new year helps to reduce the time it takes to complete an actual closeout.
At the end of each project period, PIs and departments should review accounts to make sure that all outstanding expenses have been reported. This includes checking for unresolved questions or issues that need to be addressed and addressing deadlines set in sponsored agreements. In addition, PIs should be sure that they have met University policy requirements for transferring costs to other projects before closing out an award.
Payroll Processing Significance
The payroll processing service is a vital process that needs to be accurate and timely. Failure to do so can result in fines, penalties, and legal issues for your business.
Accurate payroll processing also ensures that employees receive the correct amount of taxes and deductions. It is also important to keep all records up-to-date for year end reporting. This includes verifying that all state setups for taxes and withholdings are correct. This is especially crucial as organizations have shifted to more remote work and employees may live or work in different states.
It is important to establish policies and procedures for the payroll process and adhere to those guidelines. This helps ensure consistency and prevents errors. It is also important to determine which payroll schedule works best for your organization.
Year End Reporting Best Practices
Whether you’re new to year end reporting or a seasoned veteran, there are many steps that must be taken to ensure the process is smooth and accurate. Top CFOs recommend ensuring that department heads clear their calendar for a few days to dedicate time to these reports, and that they create a checklist to keep track of deadlines.
Verify that special tax items such as employee business expense reimbursements, taxable fringe benefits, and tip allocation information are properly reported on the company’s Form W-2. Confirm that the company’s federal (EIN) and state unemployment insurance account numbers are correct.
Consider using an online payroll software solution that enables employees to make direct deposits, making it easier for your team to manage year-end tax compliance tasks.
Employee Compensation and Tax Compliance
One of the most important aspects of payroll processing is ensuring that your business is in compliance with federal, state and local laws regarding employee pay. Failure to comply with these laws can result in large fines, penalties and even forced closure of your business.
A compliant payroll process includes having supervisors review and approve each timecard carefully before the paycheck is issued. This ensures that all hours worked have been properly accounted for and that the correct amounts for tax, company benefits and other deductions are withheld.
At year-end, the payroll platform should generate reports that provide a breakdown of wages and hours for each individual employee. These reports may also include summary documents like Forms W-2 and W-3 for employees and Forms 940 and 941 for the business.
Financial Record Keeping Guidelines
Payroll is a year-long process and it’s important to have processes in place that work well all throughout the year. Working with an accounting and bookkeeping professional will help ensure that you’re able to close payroll for 2022 correctly, meet deadlines, and establish solid practices for the future.
Government-reporting agencies require businesses to submit forms and records related to federal, state, and local tax liabilities and employee wages and withholdings. These include Forms W-2 and W-3 and may also include state unemployment and workers’ compensation reporting.
It’s critical to verify that all of your financial records, including invoices, receipts, and purchase orders are stored securely in a way that will allow them to be easily located when needed. Having an accounting system that can record, store, and manage these records will help you avoid costly errors, audits, and IRS-imposed penalties.