Basic Payroll Processing Checklist

employee paycheck deductions

Payroll Processing Checklist that the appropriate Tax Method is set up correctly to generate 1099-MISC, 1099-NEC, and 1099R form for contract and pension employees. Verify the format of employee names and addresses in the Address Book system to ensure that the information you report to the government and to the employees is accurate. Run payroll on any device with taxes, compliance & reporting built-in. All the forms related to year-end payroll reports are due by January 31 to their respective locations. If you are awarding bonuses, those payments must go out with the last paycheck of the year. You will need to keep a record of bonuses to calculate bonus taxes.

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Calculate the correct amount of money each employee will receive before withholdings. Employers have the burden of proof if there is any dispute with employees or government agencies. Additionally, you will also want to check if an employee is classified as an employee or a self-employed individual. In the event that you improperly classify an employee and fail to withhold the proper tax amounts, you may be subject to penalties and/or interest. Keep a copy of the federal workfile that you send electronically to the SSA.

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While many businesses follow the same payroll schedule and policies year after year, you may be considering a change to your payroll structure. In the age of more employees expecting quick access to their paychecks, you may want to evaluate whether options such as pay-on-demand make sense for your business. The end of the year is the best time to implement a change, so evaluate those decisions now. Determine the paycheck deposit schedule you plan to use in the new year, as well as what options you’ll have for employees to receive their paychecks. In addition to addressing the questions above, employers should prepare a payroll audit checklist to improve the efficiency of future audits. Auditors should pull time clock data and make sure all employees are being paid appropriately for their actual time worked during each pay period.

  • There may be instances in which employees are due to receive ad-hoc payments for the particular salary month, such as a discretionary bonus or a special incentive.
  • Auditors should produce employee rosters, payroll registers, and other payroll reports covering the lookback period.
  • It is the right combination of following a routine all year round by using the right techniques to get things done accurately in the end.

Verify that parent company information is set up correctly if you summarize and report multiple companies under one parent company. Whether you’re running payroll or outsourcing, use our Merchant Maverick Year-End Payroll Checklist to get started. Check out our other great payroll and tax resources for more help running your small business. Following the start of the tax year’s fourth quarter, ordering your new labor law posters for the upcoming year is important. These posters are federally mandated and expected to be displayed in a conspicuous place where all employees can read them.

Everything You Need To Know About Small Business Payroll

If the investigation reveals someone else clocking in on the employee’s behalf, this could be grounds for disciplinary action against both the employee and their “buddy” for time theft. HR teams can also modify policies and procedures or take advantage of certain software to make “buddy punching” more difficult. For example, Homebase reduces the likelihood of buddy punching by taking a picture of employees and requiring them to input a unique pin code when they clock in. Now that your organization is set up for success, it’s time to run payroll.


Companies conducting their first payroll audit or needing to diagnose problems in their payroll processes should consider semiannual or quarterly payroll audits to resolve payroll inconsistencies sooner. Once you’ve received an EIN, you should create four key federal and state withholding accounts. For federal tax payments, you’ll need an Electronic Federal Tax Payment System account.

W-4 forms:

No matter how well your software works, it will lead to incorrect calculations if, for example, you’ve entered an outdated employee salary. Occasional payroll audits solve this problem, but you should also keep a close eye on things so that your employees have no trouble receiving the money they earned. With your identifying and tax payment information all set, you can now collect your employees’ tax information. To do so, have your employees file a completed IRS Form W-4, and have your contractors file a completed IRS Form W-9. Alongside these payroll forms, you’ll also need to collect USCIS Form I-9 to verify your employees’ U.S. employment eligibility.

Keep employment tax paperwork (such as Forms W-4) for at least four years. If you choose, you can store payroll records for a longer period. If your company is required to register for Workers’ Compensation, you will be assigned an account number and a percentage rate by your provincial Workers’ Compensation Board .

As a business owner, it can be difficult to keep track of all the payroll tasks that need to be completed each year. But year-end payroll processing is a task or set of tasks that require special attention. If you don’t get these payroll processes right, you could face penalties from HMRC or other legal issues. That’s why it’s important to understand the deadlines and procedures for payroll year end. Payroll processing requires performing many tasks to ensure accurately processed paychecks and payroll tax and benefits compliance.

  • Option will take you to a screen with a checklist of all the items you need to complete before you can process the current month’s payroll.
  • You can get these necessary forms directly from your payroll service provider, printed from your payroll management system, or directly from the IRS.
  • Contingent upon your state, you might have to store worker records for longer than the FLSA’s prerequisites.
  • These amounts all tally up at the end of the year and are reflected in the T4s/T4As.
  • Another important aspect of this item on the payroll processing checklist is to make sure you’re keeping clear and complete records.

At the end of the audit, companies can then take measures to improve their payroll processes to mitigate future errors. When reviewing the data in the payroll audit, HR teams should double-check that their processes adhere to updated federal, state, or local laws and make adjustments or issue corrections as necessary. ‌For example, many states update their minimum wage laws at the beginning of the year. HR leaders should make sure all affected employees’ pay rates are updated appropriately. In addition to the payroll year-end dates mentioned earlier, part of your business tax obligations includes paying taxes owed in a timely manner.

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