Just like dominos, many things must fall into place this month and next month in order for your year-end to proceed as smoothly as possible.
√ Check the IRS’ website to ensure that you have the 2016 Forms 940 and 945.
√ Distribute 2017 W-4s. Employees whose family status changed, and those who claimed an exemption from income tax withholding in 2016, must file new forms; everyone else may refile.
√ Notify managers of the cutoff dates for the last 2016and the first 2017 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 2017, including employees’ benefits deductions and new W-4s.
√ 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 2017. 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 corp owners’ medical insurance.
√ Reconcile fourth-quarter taxes before the final tax payment is due to ensure timely corrections; reconcile year-to-date corrections.
√ Ensure that all stop payments, voids and manual checks have been processed and run payroll adjustments accordingly.
√ Archive 2016 data before processing the first 2017 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 entered into the system. Manually calculate the first 2017 paycheck of a maximum wage earner, a minimum wage earner and an employee in between to determine whether thehas been completely updated.