Since you don’t have an elf to take care of all the December year-end payroll details, you have to do it yourself. Here’s help getting started.
√ Distribute 2014 W-4s. Employees whose family status changed, and those who claimed an exemption from income tax withholding in 2013, must file new forms; everyone else may refile.
√ Notify managers of the cutoff dates for the last 2013 payroll and the first 2014 payroll.
√ Let employees know whether you will charge a fee for issuing replacement W-2s.
√ Inform your service bureau of your W-2 schedule and changes for 2014, including employees’ benefits deductions and new W-4s.
√ Use the 2014 withholding rates for checks that are mailed to employees late in the month, but that won’t be received until January.
√ Notify employees by the end of January if you haven’t withheld on their personal use of company cars, or are using the special accounting rule to value noncash fringes.
√ Reset employees’ calendar-year benefits balances for 2014. Include: 401(k) pretax contributions, and allocations for paid time off, cafeteria plans and flexible spending accounts.
√ Process special December payroll entries—impute the tax for group-term life insurance over $50,000, personal use of company cars, interest on compensation-related loans of at least $10,000 with below-market interest rates and 2% S corporation owners’ medical insurance.
√ Conduct a final review of the general ledger for “hidden” wages, notably noncash fringes.
√ Reconcile fourth-quarter taxes before the final tax payment is due to ensure timely corrections.
√ Run payroll adjustments for year-to-date corrections and void/manual checks.
√ Archive 2013 data before processing the first 2014 payroll. Ensure the Social Security wage base, state unemployment and disability wage bases (if applicable), federal/state withholding allowances and tax rates and employees’ benefits data are input into the system.