While most of us can’t wait to say goodbye to 2020, there is still work to do to ensure a smooth year-end. Putting in a little time before your final payroll of the year will help prevent expensive, time-consuming adjustments later on.
BEFORE YOUR LAST PAYROLL OF 2020
- Review your Employee Data – Before issuing W-2’s, you must verify that employee information is accurate and up to date. AccuPay’s iSolved clients can find the “Employee W2 Verification” report under Reporting/My Reports. (If you are not currently working with AccuPay, ask your payroll provider for a report showing details of all employees paid during 2020). Be sure to double check the following for all of your employees:
- Name – Check spelling and any name changes made during 2020.
- Social Security Numbers – Make sure SSN’s are entered and accurate. SSN’s starting in “9” are not valid for filing unemployment taxes or W-2’s. (These are actually ITIN’s and not SSN’s.)
- Addresses – Request updated addresses from current and terminated employees to ensure mailed W-2’s will be received timely.
- Review your Payroll Data – Making sure your payroll information is accurate and complete before your last payroll of the year is essential for your payroll provider to create accurate W-2’s. Review the list below and be sure to report any applicable information to your payroll specialist. (See AccuPay’s Year End letter for more information.)
- Wages – Make sure you have recorded all taxable wage for each employee. Report any checks issued to employees outside of payroll to your payroll specialist as soon as possible.
- Personal Use of Company Vehicles – Personal use of company vehicles is taxable income. AccuPay has created user-friendly forms for easy calculation and reporting.
- Employer Insurance – If you had 250 or more W-2’s in 2019, and pay a portion of your employees’ health insurance, the 2020 amounts must be reported on the W-2.
- Third Party Sick Pay – If you had employees earning taxable income from third party injury/disability insurance, be sure to forward any statements issued from the vendor to your payroll specialist. Identify whether the vendor will create the sick pay W-2.
- S-Corp Health Insurance – S-Corps must report any health and/or long-term care insurance premiums paid for 2% or more shareholder employees. See Form B in AccuPay’s Year End Letter.
- HSA Contributions – If you contributed amounts to employee HSA accounts outside of payroll (employer contributions) you must report these amounts to your payroll specialist for accurate W-2 reporting.
- ACA – If you are required to complete annual ACA reporting, be sure that any “variable hour” employees have hours recorded (at least monthly). (These are any employees not classified as “full-time.”) If you are not sure whether you are required to complete ACA reporting, check with your payroll specialist. In general, employers with 50 or more full-time equivalent employees must report. (See ACA – What Employers Should Know on our blog.)
- Retirement Plan Information – Employees who are “active participants” in your company’s retirement plan must be identified on the W-2. Those who do not contribute or receive an employer match in payroll may need to be identified by you as participants. Be sure to report these employees to your payroll specialist. (See Form C in our Year End Letter.)
SPECIAL 2020 CONSIDERATIONS
As COVID continues to surge, and new restrictions are imposed by local and state government, employers may find themselves eligible for FFCRA and/or Employee Retention Credits. Generally speaking, FFCRA tax credits are for wages paid to employees who are diagnosed with or quarantined due to COVID. (See Sick/Leave Rules & Tax Credits) The DOL has an extensive FAQ page for more information. Employee Retention Credits apply to employers who have faced full or partial suspension of operation due to governmental orders or who have seen a significant decline in gross receipts from the same period in 2019. PPP Loan recipients are NOT eligible for Employee Retention Credits, but may claim FFCRA credits. See our PayDay regarding the CARES Act or the IRS website for more information on Employee Retention Credit. If you meet the criteria, this credit must be reported on the Federal 941 tax return. Your payroll specialist can assist you with these credits.
- Employers who took advantage of deferring employer FICA tax during 2020 will see this tax come due – half on December 31, 2021 and the other half on December 31, 2022. Be sure to keep track of these pending liabilities so that you are not surprised when the lump sums come due.
- Be on the lookout for Unemployment Tax Rate (Merit Rate) notices. Many states begin sending these out in November for the following year. If you are using a third-party to process your payroll, don’t assume that they will receive this information. Forward a copy to your payroll specialist as soon as it is received to ensure the correct rate is withheld on the first payroll of 2021.
- In addition to merit rate notices, you may also receive a notice showing your tax filing and/or payment frequency has changed for 2021. Make sure to pass this information along to whomever is responsible for paying your payroll taxes.
- Before processing your first pay of the year, verify Indiana employees’ local taxes are correct based on the employee’s home address as of January 1, 2021. (See our recent PayDay.)
WE’RE HERE TO HELP
If you are a current AccuPay client, AccuPay’s team of Payroll Specialists is invested in making sure your year-end runs smoothly. If you have any questions or need assistance as you work through the items listed above, contact us at 317-885-7600 or via email at firstname.lastname@example.org. You may also email your Payroll Specialist directly. (Email is the currently preferred method, as our “in-house” staff is rotating to mitigate COVID risk.)
If you would like more information about AccuPay contact us at email@example.com.