The end of the year, that is. That means that for your Ocean County business’s financial reporting, this is go time.
Now that we’re into December, time is short to take care of your year-end accounting. This is something we specialize in so be sure to get on our calendar to set up your EOY bookkeeping clean-up:
Making time to look at your books before January 1 allows us to help you make last-minute adjustments that will help you be prepared in the new year. Things like reviewing financial statements, delayed or accelerated purchasing, and updating your business insurance policies can all make a big financial impact IF you know where you are going to be sitting on December 31st.
Another of those areas is payroll reconciliation. There are a number of items to pay special attention to this month to help you prepare to run year-end payroll. I’ve got a payroll reconciliation list for you.
[Reminder: Though this article does involve some tax-centric elements, we here at Tax Wealth & Financial Services Inc. don’t focus on taxes, but with payroll-focused topics, it’s essential to address some of these elements.]
Important Tasks For Your Ocean County Business’s Year-End Payroll
“Don’t be a time manager, be a priority manager.” ― Denis Waitley
You as an employer will need to meet multiple payroll requirements for your business before year-end. So set aside time this week to take care of this list, or set up an appointment so we can do it for you.
First, there is some information to verify for your year-end payroll reconciliation process.
- Employee information – Make sure you have the correct contact info for your employees before issuing W-2s next month.
- Paycheck records – Are all pay periods documented? If you paid outside of the normal schedule for reimbursements, commissions, or bonuses, make sure that’s recorded.
- Tax rate changes – Check in with your tax professional to see if 2024 will bring new tax rates or wage bases for you to follow at both the federal and state level. Make sure your software will account for any changes after the new year rolls over.
Before you run your year-end payroll, determine if additional payments need to be issued.
- Unused PTO – If you offer paid time off (PTO) to your employees, tally up their used and remaining PTO balances. Depending on your policy, ask employees if they want to save their PTO or receive cash for it. If you have a use-it-or-lose-it rule, let them know the deadline to use their PTO. (And remember to follow your state laws on PTO payouts.)
- Paycheck for your kids – If your kids work in your business, it’s more advantageous for them if you pay them as an employee instead of an independent contractor. Besides the fact that the IRS is cracking down on independent contractor classifications, setting them up as an employee means they pay less in taxes and might not even have to file a tax return. (In 2023, if you pay your child less than $13,850, they don’t have to file a return as an employee. But if you pay them $600 or more as a contractor, they have to file.)If your child is under 18 and working for your sole proprietorship, neither of you has to pay Social Security and Medicare taxes. If they’re under 21 in that situation, you don’t need to pay federal unemployment tax either.
- Paycheck for you – If you run a profitable S corp, it’s important to give yourself a sufficient salary by the end of the year. The IRS knows that S corp owners will take distributions instead of salaries to avoid payroll taxes. So they can (and will) come back to you and say that all your income is subject to tax. (Note that there are exceptions to the salary requirement if you don’t work FT in your biz or if your biz is in financial decline.)
And when you’re ready to run your final payroll of the year, be sure to account for bank holidays and then run one last payroll reconciliation audit to make sure all information will be reported properly on W-2s.
I mentioned this at the beginning, but know that these kinds of things are our bread and butter. If your South Jersey bookkeeper or your business’s payroll department isn’t prepared to handle your year-end payroll reconciliation needs, do reach out.
Looking out for you,
Kevin Duffy