Santa’s not the only one making a list and checking it twice this tax season! As the year draws to a close, it’s essential to ensure your payroll and HR processes are accurate, compliant, and ready for the new year. This comprehensive year-end payroll checklist will help you tie up loose ends, avoid costly mistakes, and prepare your business for a smooth transition into 2025.
(For a printable version, check out our 2024 Year-End Payroll Checklist PDF!)
Payroll Processing
Verify all employee information
Ensure all of your employees’ records are accurate. Double check personal information, like name, address, and Social Security number. Also confirm that banking and direct deposit information is correct.
Finalize payroll schedules
Confirm 2025 pay periods, making note of any anomalies or holiday schedules.
Review taxable benefits
Review and account for all taxable benefits and fringes. (Bonuses, health insurance, company vehicles, etc.)
Confirm year-end bonuses
Confirm and process any year-end bonuses for your employees. Make sure to run the payroll containing those bonuses within the same year — even if bonuses are run in a special payroll!
Run final payroll reports
Review all year-to-date totals for items like wages, taxes, fringes and deductions. (Pro Tip: a payroll automation system can help streamline this report creation process for you — and provide both high level executive reports and detailed reports for the payroll and HR teams.)
Tax Compliance
Reconcile payroll taxes
Confirm all of your business’s payroll taxes have been deposited. If completing payroll in-house, ensure that the IRS and all state entities have, in fact, received deposits for this year. It’s much easier (and far less expensive) to reach out prior to the end of the year. If using an outsourced provider, reach out to your representative to confirm via a tax report or a journal report for the year. (Pro Tip: Share this information with your CPA to streamline tax time!)
Prepare tax documents
Ensure accurate information for year-end tax reporting. Make sure to file your business’s documents by mid-January. distribute W2 and 1099 forms to employees and contractors by January 31, 2025.
Review state and local tax requirements
Jurisdictions each have unique requirements. Review those for all state- and local-specific items, addressing your reporting as needed. (Pro Tip: Working with a payroll service provider like Green Payroll can alleviate this step for you — a good payroll service will be proactively monitoring and alerting your business to any needed reports or adjustments.)
Verify FUTA and SUTA payments
Review requirements for federal and state unemployment taxes. Confirm proper payment amounts and submission timelines, making sure to file away all documentation.
Employee Benefits
Confirm benefits enrollment and contributions
Tax season comes hot on the heels of benefits open enrollment season. Verify that all changes from open enrollment are reflected in payroll deductions.
Check retirement contributions
Reconcile year-to-date employee contributions and any applicable employer matches. This will ensure that there is no need for reconciliation after filing. Simple reports within your payroll system should contain this information.
Review PTO balances
Review employees’ PTO balances. Clarify policies for carryovers, payouts, or use-it-or-lose-it deadlines, handling as needed.
Compliance and Legal Updates
Update minimum wage and overtime rates
Check for any changes in state or federal pay rates (minimum wage, overtime, etc.) that will be effective starting January 1. Update any information posted internally, as well as any job descriptions and hiring descriptions affected by new pay rates.
Audit employee classifications
Review I9 classification for all employees. This can include statuses like exempt vs. non-exempt, or independent contractors on 1099. Make sure your I9 forms are filed for reference and potential audit.
Check new legislation
Review and prepare for any upcoming changes to federal, state and local labor laws and tax regulations. (Pro Tip: Work with a payroll service to get proactive notifications about any impending changes. Contact Green Payroll to learn how we can help!
Employee Communication
Distribute end-of-year communications
Send out year-end reminder emails to employees that include items like:
- Key deadlines
- Benefits summaries
- Access instructions for tax documentation
- PTO policy reminders (especially for use-it-or-lose-it policies)
Recordkeeping and Audits
Archive payroll records
Ensure you have secure storage to maintain payroll records for the required audit period (usually 3-5 years).
Prepare for audits
Ensure all payroll and HR information is stored securely, easy to locate, and organized in case of a tax or labor audit. (Pro Tip: Payroll automation systems are wonderful for this!)
Update employee handbooks
Review your company’s policies and make any changes related to new legislation or regulations as needed.
Update job descriptions
If salary and wages are included in your job descriptions (both for internal use and for new hire posts), review those and update as needed with any 2025 changes.
System Updates
Review software updates and test systems
Ensure all of the software solutions associated with your payroll and HR processes are up-to-date and prepared for any new requirements in 2025. Run tests as needed for any changes made to ensure your company processes are prepared for the new year without any hiccups.
Back up data
Securely archive all critical HR and payroll information. Saving data to the “cloud” is always best practice. Hard storage of a terabyte will also provide many years’ worth of storage to keep digital copies close at hand. Best practice is to keep this information for at least five years. (Pro Tip: Always save early and save often!)
Strategic Planning
Set budget for payroll costs
Consider the business strategy for the coming year, and plan for raises, bonuses and new hires.
Evaluate vendors
Assess your current payroll and HR processes. If handling in-house, is the process efficient and secure? If working with a vendor, are they meeting your needs? Is your business at an inflection point where you’re looking for a change? Consider Green Payroll to help streamline your HR and payroll processes!
Plan for workforce changes
Review your current employee roster. Are there any skill gaps that need to be filled? Is your business growing to the point where you need to create new roles? Do you hire seasonally? Answering these questions can help you prepare for the coming year’s budget and ensure you have the resources in place for seamless onboarding and employee management.
Miscellaneous Items
Verify and set reminders for bank holidays and unusual payroll schedules for coming year
Review the 2025 calendar, making note of any anomalies or holiday schedules that might affect timing of your payroll runs.
Plan for year-end reconciliations and CPA audits
In preparation for review with your CPA (and any potential IRS audits), review all general ledger accounts and make sure your documentation is clearly organized and readily available.
Track carryover deductions
Does your business have any benefits that carry over into 2025? Account for and address any deductions, fringes, and benefits contributions that span multiple years.
Year-End Payroll Checklist Download
We hope this year-end payroll checklist was a helpful resource to you as you close out 2024! (Don’t miss your printable PDF!)
Is there anything we missed? Let us know, and we’ll make sure to include it in the 2025 checklist!
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