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Since year end takes place in December and January, now’s the time to reconcile everything from this past year so you’re ready to roll into the new year. And for everyone’s sake, you need to make sure all your payments and paperwork are in order because they affect taxes and returns.
To help you keep track of your end-of-year to-dos, we’ve created a checklist with the top seven most important tasks you need to complete to ensure you’re ready for 2020.
1. Verify your company information.
It’s easy to overlook, but don’t forget to double-check that your business information is accurate for 2019 W-2s and 1099s. If you’ve moved, changed the name of your business (or any other pertinent business information), or gotten a new EIN, you’ll need to ensure this is updated on all tax forms.
2. Verify employee and contractor data.
Review employees’ and contractors’ information at the end of the year to ensure their information is up to date, including their full names, Social Security numbers, and addresses. When you’re doing this, include any former employees who worked for you during 2019. You need to include their information for W-2s and 1099-MISCs. It’s important to have accurate information for each employee, whether they’re active or inactive, as there can be penalties associated with each misfiled W-2 and 1099-MISC.
Your team’s information must be filed with the IRS by January 31, 2019, so be sure any updates are made before that. If you’re using a payroll service, it may have earlier requirements, so check with it to be sure you’re clear on deadlines for W-2 and 1099 filings.
If you’re not the one filing the W-2s and 1099s, verify your team’s information with your payroll manager or accountant, or update it with your payroll service provider.
3. Process your final payroll.
With everything you have to do at year’s end, don’t forget to process your last payroll before the end of 2019. Any payments with a 2020 pay date will be reported in 2019 W-2s and 1099-MISCs. For example, if you’re paying employees for hours worked between December 16–31, 2019, on January 7, 2020, those wages will be included on their 2020 tax forms.
Tip: If you’ve decided to switch payroll service providers, this is the best time to do it. You won’t have to carry over nearly as much information from your old provider to your new one if you run your last payroll of the year with your old provider, and the first payroll of the year with your new provider.
4. Run your final off-cycle payment for the year.
It’s possible you’ll need to pay bonuses or backdate a 2019 payment outside of your typical payroll cycle. If that’s the case, remember that you can run an off-cycle payment with a 2019 pay date. The last day you can do this is January 8, 2020.
5. Update paid or sick time off balances.
If you don’t update your employees’ paid time off (PTO), their balances automatically roll over to 2020. We recommend updating your employees’ PTO hours at the start of the year, after you’ve run your final payroll for 2019.
Sick leave hours also automatically roll over to the new calendar year. And depending on your state’s laws, you may be required to carry over accrued and unused paid sick time to the new year. Confirm your state requirements to make sure you’re compliant.
6. Double-check benefit contribution limits.
When it comes to employee benefits, it’s easy to have a “set it and forget it” mindset, but the end of the year is a critical time to verify your employee benefits information, because benefit limits apply to each calendar year. First, you want to ensure that withholdings are correct for the new year, and if necessary, you can reset deduction and contribution limits for 2020. If you don’t do this, your existing limits from 2019 will be applied, and they may not be accurate.
7. Confirm minimum wage requirements.
As a small business owner, it’s important to stay current on minimum wage regulations in your state, since they directly affect your business. Considering minimum wage laws are a regular topic of discussion, and they’re frequently changing throughout the country, you need to stay aware of the latest developments so you can prepare accordingly.
We hope this checklist helps as you wrap up 2019. And if you’re not already using a payroll service provider, it’s worth looking into, as it can make your life easier. Square Payroll, for example, makes it easy to update your employee information and add benefits directly from our dashboard, and we’ll file all your W-2s and 1099s at the end of the year.