We are diving into all things payroll and we are focusing on completing a year-end checklist for January. It's simply a checklist of things you need to do before the end of the year. This is very important because payroll has very tight deadlines that you need to complete by January 31 of each year. The year-end starts before the last payroll is run for the year. Once the final payroll for the year has been run, your payroll processor will start working on things right away.
Getting started and your responsibilities
Here at The Bottom Line® we use Gusto as our payroll processor. Our team loves Gusto!
Gusto wants you to make sure you've completed a good portion of your year-end checklist before December 27 of each year. They want to be able to file everything on time because January is such a big month. January is when you're filing the quarter-end forms and the year-end forms.
There's another round of deadlines and dates by the 31st of the month as it relates to payroll. The farther in advance that you can start and get the process going before 12/31, the better.
Everybody has a responsibility to make sure their payroll is right and companies need to make sure their employees are involved and they do their part. If you’re a business owner who doesn’t have the time for this, just remember that because you delegate doesn't mean you're not responsible for it.
Getting to the year-end checklist
We actually use resources that Gusto provides to its advisors and resources it provides to its companies that process payroll with them. But I have to tell you, this checklist is universal no matter how you process payroll.
If you're using another software or payroll processor or payroll provider, they likely have their own process in place. And if you haven't seen any emails or any communications or you don't know what that is, reach out to that resource or that software company and ask them. Even if they’re not getting it in front of you, that doesn’t mean it doesn't exist.
Be proactive and start working on that. Don't wait for people to talk to you about this.
Every employee and contractor, (current and dismissed) should be added to Gusto
So one of the first things that it wants to make sure that you do is that you have every employee and every contractor who was paid in that year added to Gusto or your payroll processor.
Let's say for example, you just decided to adopt Gusto as your payroll provider in June 2022. Let's just say you paid them through your bank account January through May, and you decided to start paying them through Gusto, because you adopted Gusto June through December.
If you make any types of payments for dismissal, payrolls or payrolls for paid sick and family leave, if you made any payments not using gusto or even on prior payroll companies, you have to make sure everything's in Gusto.
What to do when adopting new systems and software
We typically don't like to do mid-year changes. If the provider the business owner is using automatically files all the documents for the quarter end and the year end, then we don't like to convert those mid-year.
One year we did that and what happened is this payroll company reported W2s and 1099s. Then Gusto reported W2s and 1099s. It then looks like the person who got two W2s made more money than they did.
So you’ve got to be really careful when you're trying to adopt new systems and software and then pay attention to the process at the end of the year so that if that does happen, you can try to undo it sooner than later. You do need to understand from that company how they handle year-end.
Adding fringe benefits and employees’ retirement deductions and contributions to Gusto
Now you've got to make sure that you add any fringe benefits that you offered throughout the year. Fringe benefits are like company cars, gym memberships, relocation, reimbursements.
Fringe benefits are not common, but they do happen and they're very important to get right all the way back as far as you need them to be, but especially before you close out your payroll at the end of the year.
You also need to make sure that you've added any of your employees retirement deductions and contributions to Gusto as well.
Marking shareholders in your employment details
You could have shareholders if you are an LLC, if you are taxed as an S Corp, you are an S Corp, or C Corp. Shareholders who own more than 2% of the company should be marked as a shareholder in their employment details.
For example, if you're in an S Corp situation or an LLC taxed as an S corp, and you're a 2% shareholder with health insurance benefits, that has to be part of your W2. So it's very important that your payroll processor and the software that you're using, understand who you are. And if you don't have that set up properly, your W2 at the end of the year is not going to report properly and you're going to have to go back and readjust things.
Making sure employees’ work addresses are updated properly
One thing people really don't do well at is making sure that the work addresses of your employees are updated properly. So when people move, especially when you have a remote workforce that works from home, it’s important to update their address.
That is particularly important if they actually moved to a different state. So getting people to update their addresses and making sure the work addresses match their addresses is really important. You need to make sure you notify your employer that you've moved because the work address is not something that people typically can change inside a payroll system.
Need a better payroll processor?
We haven't found a better provider or partner in the marketplace for payroll than Gusto. And from an employee standpoint, here are some of the things that our employees love most.
Most of you are always within just a couple feet of your phone. With Gusto, you can clock in and out from anywhere with your phone. PTO doesn’t require you to reach out to HR to find out what your remaining PTO hours are. They’re available from the phone that’s already in your hand and you can request time off just as easily. It’s the same for sick time as well.
Gusto is very user friendly so accessing things like your hours, paystubs, PTO, sick time, benefits, all the way to your employee handbook are just a few clicks away.
If you want to learn more about your year-end checklist, check out Episode 107: Year-End Payroll 2022: Completing a Year-End Checklist for January Success.
