What’s Involved in Payroll Processing and Year-End Compliance?

First and foremost, processing payroll requires accurate calculations of compensations, deductions, and taxes to be withheld. Failure to withhold enough can result in penalties and interest charges for the employer and unexpected tax bills for employees. It’s essential that tax payments are timely and accurate. Year-end reconciliation involves a careful review of payroll records and tax deposits to ensure that the company is in full compliance with all federal, state, and local revenue codes. Administrators carefully verify that:

• General Ledger entries for the year match the payroll sums for the year.
• The tax returns for the year also reflect accurate payroll sums.
• Tax deposits for the year are in line with the data on the applicable tax return amounts.
• W-2 totals equal the tax returns and payments.

One of the hardest tasks in year-end processing consists of the preparation and filing of tax returns. With thousands of tax localities in the U.S., even small businesses easily become ensnared in excessive reporting, and some must file many different tax returns. In addition to federal reporting, each state has its own rules, and so do many counties, cities, and school districts. Companies face a slew of requirements at year-end; here are just a few:

• Companies report quarterly on federal income plus Social Security and Medicare taxes paid. The final filing of the year occurs during the year-end process.
• Federal unemployment tax is reported at year-end.
• Many state- and locality-specific income tax returns are due.
• Separate forms may be required for any state unemployment or disability taxes paid.
• By the end of January, employers must prepare and deliver W-2 forms to employees and 1099 forms to contractor

Click here to download your year end payroll checklist along with other tips on year end processing. anabolisant musculation