As January begins, businesses are focused on closing out last year’s payroll and tax responsibilities. Preparing W-2s and other year-end reports can be complex, but with proper planning, businesses can avoid common errors and costly penalties. At SolveHR, we specialize in providing HR solutions, including payroll support, to help make this process seamless. Here’s what employers need to know as they finalize payroll for 2024 and ensure compliance in the new year. 

Why Year-End Payroll and W-2 Reporting Are Essential 

Finalizing payroll and issuing W-2 forms may feel like a heavy administrative lift, but the benefits go beyond compliance. Here’s why these steps are so critical: 

• Employee Accuracy: Correct W-2s mean employees can file accurate tax returns, avoiding IRS inquiries and ensuring they receive correct refunds or owe the right amount. 

• Compliance: Missing deadlines or filing incorrect forms can result in costly IRS penalties. 

• Payroll Analysis: These reports offer a comprehensive look at total payroll expenses and trends, which can help businesses set budgets and staffing goals for 2025.
  

Step-by-Step Guide to Completing W-2s 

A W-2, also known as a Wage and Tax Statement, summarizes wages paid and taxes withheld over the past year. To meet the IRS January 31 deadline, businesses should follow these steps: 

1. Verify Employee Information: Ensure all employee records, including names, Social Security numbers, and addresses, are up-to-date to avoid filing errors. 

1. Review Year-End Payroll Totals: Confirm that annual wage and tax totals match the amounts reported in each quarterly payroll report, including wages, bonuses, and any additional earnings subject to tax. 

1. Include Reportable Fringe Benefits: Some benefits, like employer retirement contributions or company vehicle use, need to be documented on the W-2. Ensure these are accurately calculated and reported. 

1. Distribute W-2s by January 31: The IRS requires that W-2 forms reach employees by this date. Businesses can either mail physical copies or provide digital access with employee consent. 

1. Submit W-2 Forms to the SSA: W-2 forms must also be filed with the Social Security Administration by January 31, either electronically or on paper (although electronic filing is encouraged to reduce errors).
   

Key Year-End Payroll Reports for Compliance 

In addition to W-2s, employers must complete other year-end reports, such as: 

1. Form 940 (Federal Unemployment Tax Act – FUTA): This form, due by January 31, calculates the federal unemployment tax owed by employers to support unemployment programs. 

1. Form 941 (Employer’s Quarterly Federal Tax Return): It’s essential to review quarterly filings to ensure that all federal income, Social Security, and Medicare tax payments are accurately documented. 

1. State Unemployment Tax Reports: Each state has its requirements for reporting unemployment taxes. Verify that state tax payments align with annual wage records. 

1. Employee Benefits Statements: While not always required, many businesses provide a year-end benefits summary that includes retirement contributions, health insurance, and other perks. This can be a helpful way to communicate total compensation to employees.
   

Tips for January Payroll Preparation 

While January can be a busy month, these best practices can simplify payroll reporting and W-2 distribution: 

• Conduct Pre-Deadline Reviews: Regularly auditing payroll data throughout the year can help minimize last-minute errors and ensure accurate reporting. 

• Use Payroll Software: Investing in a reliable payroll system can streamline W-2 generation and ensure compliance with changing tax regulations. 

• Partner with a Payroll Professional: SolveHR can assist with complex payroll and HR needs, ensuring that your business meets all compliance deadlines and reporting requirements. 

• Communicate with Employees: Remind employees to review and update personal information for accurate W-2 reporting. Misaligned data can delay tax refunds or trigger IRS issues.
  

Avoiding Common Pitfalls in Year-End Payroll 

Year-end reporting requires precision. Here are a few common issues to watch for: 

• Incorrect Social Security Numbers or Employee Names: Double-check that employee names and Social Security numbers are accurate and match official records. 

• Misreporting Benefits: Non-cash benefits, such as personal use of a company vehicle, should be properly classified and reported on W-2s. 

• State Reporting Errors: Each state has unique requirements, so be sure that all state tax filings align with year-end records to avoid penalties. 

• Missed Deadlines: Filing deadlines for W-2s and other forms are strict, with fines for late submissions. Calendar reminders can help ensure that all deadlines are met.
  

How SolveHR Can Help 

With SolveHR, your business doesn’t have to face the complexities of year-end payroll reporting alone. Our comprehensive HR and payroll services streamline the process, ensuring accuracy and compliance with all federal and state regulations. By partnering with a Professional Employer Organization (PEO) like SolveHR, businesses can free up valuable time and resources to focus on growth. 

January is a critical month for payroll compliance and year-end reporting. By staying organized, verifying employee data, and utilizing payroll support services like those offered by SolveHR, your business can navigate the process efficiently and set a strong foundation for the new year. Contact SolveHR today to learn more about how we can help streamline your payroll and HR needs.