Year-end payroll reports are how you make sure your business has paid its employees and can properly account for all employee expenses. Wrapping up your last payroll of the year may also give you some insight into your business’ financial health, as well as a better snapshot of potentially owed taxes. This article will explore everything you need for your year-end payroll checklist, including a list of tax forms, and tasks to complete to set up your payroll for the following year. 

What is Year-End Payroll?

Year-end payroll is the process through which you calculate employees’ wages, taxes, benefits, and any other deductions for the year to determine their total compensation, as well as ensure tax compliance for yourself. The payroll year-end period begins in the fourth quarter and runs through the first quarter of the following year (with most business taxes due either mid-March or mid-April, depending on the type). 

Payroll year-end duties can be complex, so if you’re struggling with putting together all the pieces, it’s best to contact a professional accountant to help you make sense of it all. 

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Year-End Payroll Checklist: How to Get Your Beauty & Wellness Business Ready

Your payroll year-end responsibilities will involve a lot of tracking, reviewing, calculating, as well as sending and collecting forms. Below is a handy year-end payroll checklist we’ve put together to help you sort through everything you need to do. 

Get Your Business Info in Order

Double-check your business information to verify everything is up-to-date, and that you’ve correctly recorded details like your business name, address, and EIN. Your business should also have an active status, which means you’ve paid all of your relevant LLC or S-Corp fees on time (if applicable). 

Check Your Employee Records

Make sure you have all of your employees’ correct information, such as full name, address, social security number, and their W-4 forms, which indicate their paycheck withholdings and filing status. If you have any contract employees, account for them as well. 

Account for New or Absent Employees

Note if any employees left your business during the year, or if any new members started. It’s important that their information gets processed accordingly so that you can account for their information in your calculations, and that they are able to file their own taxes by the deadline. 

Run Your Final Payout

Before you can calculate your payroll year-end numbers, you’ll need to pay out your employees’ final paycheck, bonuses, or any other outstanding wages due before December 31st. Once you’ve done that, you’ll have a much more accurate picture of your financials. 

Determine Total Wages 

If you have payroll software, you can run a year-end payroll report that will give you a summary of wages, deductions, tax withholdings, and other expenses. Otherwise, you’ll have to manually calculate the gross and net pay to your employees for the year, and calculate any additional income such as tips, bonuses, or commissions. Also note any PTO days and exemptions. Ensure you’ve recorded all paychecks, you haven’t missed a payment to your employees, and that your withholdings match your employees’ W-4s. 

Gather Your Tax Forms

You’ll need to file a series of forms for your last payroll of the year, such as the 1099-NEC, Form 941, and W-2s. Get copies of each of these forms and be sure to fill them out accurately so that your final financial reports are in top shape come filing time. 

Submit Your Documents

Once you’ve verified all the necessary information, made your wage calculations, sent final payments to employees, and filled out the relevant forms—phew!—you’re ready to submit your documentation to the IRS. Create an account to e-file online, work with an accountant, or, if you use GlossGenius software, use our Payroll features for automated tax filing. 

Prep Payroll For Next Year

New tax laws often come into effect at the start of the new year, so double check that your payroll gets updated with the most current information regarding federal and state income tax rates, social security and medicare (also known as FICA), minimum wage requirements, and any other recently implemented rules and regulations that can affect the start of your new payroll. 

6 Tax Forms You Need for Your Year-End Payroll

The specific forms you’ll need for your year-end payroll can vary based on your business type or you may even need additional forms—however, below are the most common types of forms you’ll need to run payroll. 

1. Form W-2

A W-2 reports withheld employee taxes to the IRS. W-2 forms are for hourly/salaried employees only, not contractors. You are responsible for sending a copy of the W-2 to the employee before the end of January the following year. 

2. Form W-3

The "Transmittal of Wage and Tax Statements" document, also known as the W-3, is a form that essentially records the same information as the W-2—taxes, withholdings, total wages—except it is prepared specifically for the Social Security Administration. 

3. Form 1099-NEC

1099 forms are necessary if you’ve paid contract employees at least $600 in wages. This form lets you report info like federal and state taxes withheld for your freelance or self-employed workers. 

4. Form 941

The employer’s Quarterly Federal Tax Return document, also known as Form 941, is a quarterly form that reports both the employer and employees’ federal income tax withholding, as well as Social Security and Medicare tax. 

5. Form 940

The Federal Unemployment Tax Return (FUTA) is for employers to report federal unemployment taxes. Determined by federal regulations, the FUTA tax is a tax paid by employers on employee wages so that in the event of job loss, an employee can apply for unemployment benefits. Employers who have at least one employee who works part-time or have paid at least $1,500 in wages must fill out a 940. 

6. Form 1095-B

As mandated by the Affordable Care Act, Form 1095-B is for small business employers who provide health benefits to their employees. It confirms coverage for indicated employees. (Form 1095 is necessary if your business employs more than 50 people.)

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Beginning of the Year Payroll Checklist: Whatʼs Next?

Once the new year begins, there are still a few tasks you’ll have to complete before your payroll duties are over. 

Update Your Records

New year, new you! And perhaps, some new changes. Record any changes in your employees’ records, such as filing status or number of dependents. This will help you start off the year with the most accurate information for your employees, and reduce the risk of sorting through errors later. 

Pay Any Year-End Taxes

If you pay taxes quarterly and owe any for the fourth quarter, make sure you’ve cleared these by their deadlines to avoid unnecessary penalties or fees. Failure to pay owed taxes can result in a suspension of your business license as well as other legal consequences. 

Send Your Employees Their Forms

Your hourly/salaried employees will need their W-2s so they can start preparing their own tax documents for the mid-April deadline. If you have contract employees, you’ll need to send a 1099-NEC or a 1099-K. A 1099-K is a tax form that payment providers, such as Venmo and PayPal, and platforms like GlossGenius are required to report and share with customers who meet certain transaction thresholds (at least $20,000) in a given calendar year. Only business owners and independent contractors will receive a 1099-K—regular employees will receive their standard W-2s. You are required to send these out by January 31st in the new year following your payroll.

Simplify Your Payroll with GlossGenius

Payroll is a necessary part of running a business. It’s critical you follow all the proper steps to accurately report paid wages and expenses for your employees and ensure your business is in complete tax compliance. Missing payments, incorrect deductions, or improperly withheld wages can set you up for a tax season disaster, so the better handle you have on your year-end payroll process, the better. 

GlossGenius is an all-in-one solution for beauty and wellness businesses looking for something to manage their entire business, including employee payments. Take advantage of our Payroll, Finances, and Team Management features to seamlessly handle your daily staff needs. 

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