Year-End Payroll + HR Guide

Verify the following information for your company:

• Tax IDs
• Legal name
• Legal address
• Federal, state, and local (if applicable) tax identification numbers
• State unemployment rates

Check with your provider to see if you have access to this information in your Quarterly Tax Packet. If you find an error, let your provider know so they can help you correct it.

Veteran’s Day is November 11, and is a federal holiday. Adjust your payroll processing accordingly to prevent delays.

Before you process your last payroll of 2024, verify you have recorded and properly taxed all non-cash and cash income on the W-2 and quarterly 941 tax return. Typical W-2 adjustments include:

• Group-term life insurance over $50,000
• Personal use of a company vehicle
• Third-party sick pay
• Company-provided transportation or parking
• Non-qualified moving expense reimbursements
• Non-accountable business expense reimbursements or allowances
• Bonuses and other annual incentive pay
• Employer-paid education not related to the employee’s job
• Non-cash payments

S CORPORATIONS

Another common year-end adjustment is employer-paid health insurance for subchapter S shareholders who own at least two percent of the company. Although adjusting a W-2 record to reflect this amount is relatively easy, it is best to include it with a payroll run. This process ensures reporting on the applicable quarterly and yearly payroll tax returns. View the IRS requirements for subchapter S filing to ensure your company reports correctly.

Record any employee checks issued outside the normal payroll process and pay their tax liabilities on the applicable due dates. Confirm that all “manual checks” cut during the year have been accounted for and updated. Likewise, record all voided checks.

Some payroll checks cut throughout the year may not have been cashed. These checks should not be voided in the payroll system but should instead be considered unclaimed property and reported to the appropriate state agency. The unclaimed property office may be a division of your state’s Department of Revenue or treasurer’s office.

To recap:

• Account for manual checks written during 2024.
• Confirm that all voided checks have been recorded.
• Report uncashed checks to the appropriate state agency as unclaimed property.

Third-party sick pay is a disability insurance benefit that provides employees with partial or full-wage benefit payments in the event of an injury or illness that prevents the employee from working. These payments are not made through the employer but through an insurance company, union plan, or a state temporary disability plan.

Make sure to submit the total amount of any temporary disability payments your employees received in 2024 to your payroll provider no later than December 31, 2024. You can use the third-party sick pay statement you received from your carrier for reporting purposes.

A fringe benefit is considered a form of payment for the performance of services. For example, you provide an employee with a fringe benefit when allowing the employee to use a business vehicle for personal use. Any fringe benefits you provide are taxable and must be included in the recipient’s pay unless the law expressly excludes it.

You must report the value of fringe benefits as taxable income unless the law expressly excludes it. Fringe benefits are subject to taxes, and employers must include the amounts on Form W-2 in boxes 1, 3, and 5. The amount will also be listed as a memo in box 16.

Thanksgiving Day is November 28 and is a federal holiday. Adjust your payroll processing accordingly to prevent delays.

For most states, the computation date used to determine SUI tax rates is July 1 before the calendar year.

As state workforce agencies begin to recover from the financial challenges brought on by the COVID-19 pandemic, employers should monitor how these challenges could influence their state unemployment insurance (SUI) tax rates this year and in the future. 

You must provide any rate change notices you receive to your provider as soon as possible.

Verify that all non-cash and cash income has been recorded and taxed properly so that it can be reported on the W-2 and the quarterly 941 tax return. Common W-2 adjustments include:

• Group-term life insurance in excess of $50,000.
• Personal use of company vehicle.
• Third-party sick pay.
• Company provided transportation or parking.
• Non-qualified moving expense reimbursements.
• Non-accountable business expense reimbursements or allowances.
• Bonuses and other annual incentive pay.
• Employer-paid education not related to the employee’s job.

Non-cash payments. Another common year-end adjustment is employer-paid health insurance for subchapter S shareholders who own at least two percent of the company. Although it is fairly easy to adjust a W-2 record to reflect this amount, it is always best to include it with a payroll run to ensure that it is reported on the applicable quarterly and yearly payroll tax returns. View the IRS requirements for subchapter S filing to make sure your company is reporting correctly.

Review employee classifications regularly to ensure compliance. Refer to the duties tests and guidance provided by the Department of Labor to manage your employee classification.

Any employee checks issued outside of the regular payroll process must be recorded, and their tax liabilities must be paid in accordance with the applicable due dates. Confirm that all “manual checks” cut during the year have been accounted for and updated in the system. Likewise, all voided checks should be recorded.

Some payroll checks cut throughout the year may not have been cashed. These checks should not be voided in the payroll system, but should instead be considered unclaimed property and reported to the appropriate state agency. The unclaimed property office may be a division of your state’s department of revenue or treasurer’s office.

To recap:

• Account for manual checks written during 2024.
• Confirm that all voided checks have been recorded.
• Report uncashed checks to the appropriate state agency as unclaimed property.

The first payroll of the year is an opportune time to review and update your employee deductions. Don’t forget to check deductions like:

• Medical
• Dental
• Life Insurance
• Retirement deductions – 401(k), 403(b)
• Other voluntary deductions

Retirement plan regular and catch-up contributions will be deducted automatically from the first payroll for 2024. Review your retirement plans, report any needed changes, and submit those updates with your first payroll for 2024.

Make sure you wrap up ACA annual reporting and filing to avoid penalties for late or incomplete paperwork:

• Failure to file complete and accurate Forms 1094-C by the form deadlines will result in penalties of up to  $310 per return.
• Failure to file and provide correct information on Form 1095-C could result in a $310 penalty per return.

Click here to get complete Minimum Wage Rates by state. Contact your payroll provider if any changes apply to your business.

Click here to get complete SUTA Wage Bases by state. Contact your payroll provider if any changes apply to your business.

If you receive a new state unemployment insurance rate notice for 2025, please send it to your payroll provider for updating.