COMPLIANCE
personal details of employees, such as names, addresses and social security numbers (SSN). It’s crucial to ensure that this information is accurate and up to date to prevent any complications that could lead to processing delays or financial penalties. Creating a detailed checklist can serve as a valuable tool to guarantee that no critical element is missed during this review. Payroll adjustments and reporting One of the more complex aspects of the year-end process is addressing payroll adjustments. This involves identifying and reporting any discrepancies or omissions in taxable wages and withholding taxes before the final payroll run of the year. These adjustments are to ensure that the information reported on Form W-2 is accurate and complete. The intricacies of payroll adjustments are further compounded when dealing with employees who have worked internationally during the tax year. US employees on overseas assignments may have received benefits or allowances in their host country that need to be reported through US payroll. Conversely, non-US employees on assignment in the US may have compensation elements from their home country that require reporting, which may include contributions into a non-US pension. Employers must therefore be diligent in collecting, reviewing, and analysing data from various sources, including expense reports, to ensure all reportable items are accounted for. It’s imperative for organisations offering tax equalisation to their international assignees to accurately capture any gross-up tax through payroll. Additionally, any payments or repayments resulting from tax equalisation should be reported through payroll as part of the year-end process.
After the final payroll run of the tax year, the next step is to prepare and submit employer tax returns and forms, along with remittances of withholding taxes. Conducting a final review of all business and employee information, as well as the amounts of wages and taxes, is strongly recommended before submission of tax returns and forms to the relevant US tax authorities. Essential forms and deadlines Employers must be cognisant of the various forms required by the IRS and their respective deadlines. These include: l form W-2: This form reports employee wages and taxes withheld and must be filed with the SSA by 31 January. Employees must also receive their copies by this date l form W-3: This form summarises the information from Forms W-2 and is filed with the SSA by 31 January l form 1099-NEC: This form is used to report non-employee compensation and is due by 31 January l form 1095: Employers with 50 or more full-time employees must submit this form, which documents health insurance coverage l form 940: This form reports FUTA wages and is filed with the IRS by 31 January l form 941: This is a quarterly federal tax return for employer and is due by the end of the month following each quarter end l form 944: This is an annual federal tax return for employer and applicable to smaller employers with annual payroll taxes of $1,000 or less. This form is due by 31 January. Preparing for the new tax year With the commencement of the new tax year, it’s essential to prepare a payroll calendar that aligns with the business’s pay cycle. This calendar should include all relevant dates, such as those for processing bonuses and equity payments. Employees should be informed of the opportunity to update their Form W-4 for the new tax year and employers must verify compliance with any changes in minimum wage laws. State-specific considerations and professional advice Each US state may have unique forms and payroll reporting processes, making
it important to adhere to the specific guidelines outlined in the employer handbook published by each state. Consulting with a US tax adviser can offer additional clarity and ensure adherence to all state-specific regulations. For complex aspects of the US payroll year-end process, seeking professional advice is highly recommended. Expert guidance can assist with navigating the intricacies of the process, ensuring accuracy, compliance and a smooth transition into the new tax year.
Embracing technology and automation In today’s digital age, embracing technology and automation can
significantly streamline the payroll year- end process. Payroll software solutions can automate many of the tasks involved, reducing the risk of human error and saving valuable time. These systems can also provide real-time reporting and analytics, which can be instrumental in making informed decisions and identifying any potential issues early on. Employee education and education communication A critical but often overlooked aspect of the payroll year-end process is employee education and communication. Ensuring that employees understand their pay stubs, tax forms and the importance of updating personal information can prevent errors and reduce the number of inquiries payroll departments receive. Effective communication strategies, such as informational sessions or distributing user-friendly guides, can empower employees and foster a culture of transparency and trust. The right approach The US payroll year-end process is a multifaceted undertaking that requires careful planning, attention to detail and proactive management. By following the steps outlined in this article, payroll professionals can confidently navigate this critical period, ensuring their organisation’s payroll operations are compliant and well prepared for the year ahead. With the right approach and resources, the payroll year end can be transformed from a daunting task into an opportunity for organisational growth and stability. n
Strategic scheduling and compliance To ensure compliance and avoid
penalties, it’s advisable to establish a clear schedule for the payroll year-end process. This schedule should outline each step, assign responsibilities and set deadlines to ensure all tasks are completed in a timely manner. Initiating the process in the final quarter of the tax year, around October, will provide ample time for thorough completion.
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| Professional in Payroll, Pensions and Reward |
Issue 104 | October 2024
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