Year-End Information for Square Payroll
Update: Square Payroll has filed and mailed all 2020 Form W-2s.
Employees may receive two paper copies of the Form W-2 in the mail: one watermarked as a draft, followed by one without a watermark. Square Payroll files Form W-2s electronically so the paper watermarked draft copy has no impact on W-2 filings. Employees can use the information on this copy for their personal tax returns.
Digital copies of the Form W-2s can also be found in your Square Payroll account:
• Employers can access a copy of your Form W-2s under the Payroll > Tax Forms tab in your Square Dashboard. Form W-2s are not available in the Square Payroll mobile app for employers.
• Employees with online accounts can also access a copy of their Form W-2 under their Tax Forms tab in the Team Dashboard or in the Square Team app.
Each year Square Payroll emails employers a year-end guide and timeline which walks you through what you need to have prepared at the end-of-year (EOY) for annual federal and state tax filings and how to prepare for the upcoming year. You can find this on Payroll in Square Dashboard as well. We recommend reading through the year-end guide to help ensure all of your business and team information is up to date before we file your annual payroll taxes.
We recommend taking these actions by the following dates. You can also find this timeline by going to Payroll in Square Dashboard.
These actions should be completed by their respective deadlines:
|Begin reviewing draft Form W-2s||December 28, 2020|
|Begin reviewing draft Form 1099-NECs||December 28, 2020|
|Update State Unemployment Insurance (SUI) tax rate||Before first run of 2021|
|Update benefits, sick and/or and paid time off||Before first run of 2021|
|Last day to run an off-cycle or contractor payment for 2020||January 8, 2021|
|Last day to update team member's name, SSN, and address on draft forms||January 8, 2021|
|Annual 2020 and Q4 2020 tax filings complete. Form W-2s and/or Form 1099-NECs mailed to team. Note: Additional state filings for AR, IA, MN, NJ, and OH will be completed by the state deadline of February 28, 2021.||January 31, 2021|
Review team member information
Confirm your employee and contractors’ first and last names, Social Security numbers (SSN), and home addresses by going to Payroll > Payroll Team in Square Dashboard. This information will be printed on each of their Form W-2s and/or Form 1099-NECs. The last day to make changes to the draft Form W-2s and Form 1099-NECs is January 8, 2021. We will begin filing the tax forms on January 13, 2021 and will mail each tax form to the address provided by January 31, 2021. If a delivery attempt is unsuccessful, you will be responsible for providing Form W-2s and/or Form 1099-NECs to your affected team members.
Add all former team members to Square Payroll
Double-check that all employees you’ve paid this year—including those who no longer work for you— have been added to Square Payroll. You are responsible for providing Form W-2 to all employees you paid in 2020. Learn more about adding employees to Square Payroll.
Previous payroll history should be provided to Square Payroll immediately after switching providers. If you have not transferred your year-to-date payroll history yet, please contact us as soon as possible and we will attempt to accommodate this request.
Contractor payments made prior to switching to Square Payroll can be made by signing in to Payroll in Square Dashboard. Choose the pay period and set the payment method to Pay All by Check to ensure the contractor is not paid an additional time. Add the contractors and paid amounts, then confirm the pay run. Payments made by January 8, 2021 (1/8/2021) will be reported on their 2020 Form 1099-NECs.
Send your final payroll
Payroll taxes are due based on the pay date, not the days employees worked. Any paychecks with a January 2021 pay date—regardless of the actual pay period—will be included in 2021 tax filings and annual Form W-2s. If you’d like wages to be included in 2020 Form W-2s, make sure the pay date recorded in Square Payroll is in 2020 before sending.
You’ll be able to send off-cycle payments and contractor payments for 2020 until January 8, 2021. (1/8/2021). Note: Off-cycle payrolls processed in 2021 may result in tax penalties. We recommend processing payroll as early as possible.
Pay year-end bonuses
You can pay year-end bonuses by running an off-cycle payment. When running the off-cycle payment, select Bonus or Supplemental Pay as the payment type and enter the desired amount under the Additional Pay column. Taxes will be calculated using the supplemental federal withholding rate of 22%. If you want bonuses to count towards 2020 wages, submit an off-cycle payment by January 8, 2021 (1/8/2021).
Note: Off-cycle payrolls processed in 2021 may result in tax penalties. We recommend paying out bonuses as early as possible.
Update State Unemployment Insurance (SUI) rate
Once you receive your new state UI rate, you can update it by going to Payroll > Settings > Tax Info in Square Dashboard. We recommend doing this before running your first payroll of 2021. If the rate is updated in the middle of the quarter, Square Payroll will recalculate your UI taxes and credit or debit your account based on the UI rate at the end of the quarter.
If you are in CA, NY, VA, PA, WA, or WI, we will automatically update this rate for you and no further action will be required. If you’re in GA, NJ, or SC, please contact us to update your rate.
Reset sick and/or paid time off (PTO) balances
Employee sick leave and/or PTO balances automatically roll over to the new calendar year. If you need to reset an employee’s sick leave and/or PTO balances, we recommend resetting these prior to sending your first pay run in 2021. You can update your employees’ sick leave and/or PTO balance on an employee’s profile by going to Payroll > Payroll Team in Square Dashboard.
Note: Depending on your state, you may be required by law to carry over accrued and unused paid sick leave balances to the new year.
Reset benefit contribution and post-tax deduction limits
Benefit and post-tax deduction limits apply to each calendar year. If you manage any benefits outside of Square Payroll, you can set up and adjust annual contribution limits for each benefit on an employee’s profile by going to Payroll > Payroll Team in Square Dashboard.
We recommend setting up your 2021 contribution limits prior to sending your first pay run in 2021. If you do not set any benefit or post-tax contributions, your 2021 limit will be set to your existing 2020 limit.
No further action is required for employers using our SimplyInsured or Guideline benefit integrations.
S-Corp Health Insurance reporting
If health and accident insurance premiums were paid for by a S-Corporation, shareholders with at least 2% ownership are required to report premiums as wages on their W-2s (subject to income tax withholding). You can read more about S-Corporation health premium reporting on the IRS website.
If you are set up as an S-Corporation on Square Payroll, we’ll send you an email requesting a list of names and premiums amounts. Please respond to the email or contact us by December 18, 2020 with the premium amounts.
Ensure that your taxpayer address is up to date so that your business’ tax reporting is accurate. If the taxpayer address that is on file with Square Payroll does not match what the IRS or your state agency has on file for you, there may be issues with your tax filings or payments. In the instance that tax forms are mailed to your business, you’ll want to have the correct address on file as well.
You are able to update your taxpayer address directly from your online Square dashboard. To do so:
1. Log into your online Square Payroll dashboard> Settings > Business Info.
3. Select Edit next to your Taxpayer Address and provide your correct address.
4. Press Save.
Note: Your updated Taxpayer Address cannot be in a new tax jurisdiction. If you need to pay W-2 employees across work locations or multiple tax jurisdictions different from your business’ primary address, add the additional work addresses in your team member's profiles from the Payroll Team tab. From there, go to the Tax Info tab to add your state tax account information for the additional work locations.
Federal and state tax filings
Square Payroll completes federal and state tax filings and payments on your behalf at no additional charge. Once these forms are filed with the appropriate agencies, you can download, save, and print each document by going to Payroll > Tax Forms in Square Dashboard. See Square Payroll tax filings and payments for a full list of tax forms we handle.
Square Payroll will mail Form W-2 and Form 1099-NEC to each team member by January 31, 2021 (1/31/2021). Any team member who has an online account can also access their tax forms online through the Tax Forms tab or Square Team app.