By: Becky Harshberger
It’s never too early to begin planning for year-end, even if you want to get a head start in September!
The number one key for planning is data integrity and balancing. You’ll want to make sure that employee-related data is accurate, so that your employees get their W-2’s timely either electronically and/or through the mail.
Take adequate steps to ensure your workers’ emails and physical addresses are correct, and that they can log onto a secure system to receive their W-2’s online. Of course, you’ll also want to make sure that the same accurate information is going to state and federal agencies. Earnings should be reported in such a manner that when an employee’s personal income taxes are conveyed, there is a smooth match with their personal return. There should be nothing that would raise any red flags for a state or federal audit. These days, the Affordable Care Act (ACA) reporting needs to be integrated, further complicating year end processes matters.
A payroll company should be paying specific attention to changes that respective states may enact during the summer or fall, to assist with gathering data for the next year. Be on the lookout for the social security wage base, usually announced in mid-October. Additionally, various states’ State Disability Insurance (SDIs) wage base and employee contributions changes will be released toward the end of November.
The IRS and state agencies will implement tax table changes at the beginning of the year. Hence, be mindful that the last paycheck in December could look drastically different from the first paycheck in January.
Consider a communication plan to your finance executives, so they can budget for any increase in social security on the employer-side. Lastly, you’ll want to let the production workers know that their paychecks will look different in January due to state and federal tax table and SDI changes.
Issue a Tax Alert
In the beginning of January, Entertainment Partners (EP) issues a Tax Alert, comparing a typical paycheck from the previous year with a current one. We highlight the differences in order to mitigate the number of inquiries production accountants or paymasters receive about the changes.
It’s imperative to start planning early so that none of the people and agencies who rely on you will have any surprises. It’s best to keep information flowing so that everyone is up to speed. If you do all of these things with a strong emphasis on data integrity, you’ll have a much higher success rate, a smoother year end, and (fingers crossed) a seamless transition to the New Year!