It’s that time of year when employers are closing out the year and preparing for employees’ Forms W-2 (which I’ll reference as W-2s moving forward). Taking a proactive approach can help employers avoid these common mistakes in 2014.
One of the most common mistakes made around this time of year is the reporting of incorrect employee wages. If an employee is subject to third-party sick pay, group term life (GTL), or dependent care, employers need to be sure they review the timing for W-2 information with their payroll processor. Employers should request updates regarding 401(k) and benefits from employees and insurance carriers to ensure everything has been claimed appropriately.
Employers must keep in mind that there may be special reporting required for fringe benefits such as short term and long term disability, group term life, moving expenses, and other taxable fringe benefits. Typically, these adjustments need to be made before the last payroll of the year, but employers should notify their payroll provider if there are any last minute changes. In order to stay compliant, employers can review the Employer’s Tax Guide for Fringe Benefits on the IRS website.
Verification of employee information is detrimental and no one likes the additional fees that are associated with producing a corrected Form W-2 (Form W-2C). The important information to verify for employee data includes: the employee’s full name, address, Social Security Number, and tax form setup (W-2 or 1099).
It can be difficult to round up employees to verify their information, especially if you’re working in a large company. Take advantage of these options: send out a reminder in the company newsletter, post a notice in the break room, or make employees physically pick up their paycheck or check stub to verify information with them. Yes, this could be a time consuming process; however, consider the time and money you’ll save by proactively verifying this information ahead of time.
We’ve touched on employee information, but the employer tax information is also important to review. This not only applies to your current tax information but also for any companies that are closing, merging, or being acquired. The information to look over from the employer standpoint includes: local, state and federal tax ID numbers, rates, filing frequencies, and filing methods. Keep in mind, some states start sending out the next year’s tax rate and frequency as early as October, so be on the lookout to ensure you have the correct rate applied to avoid deposit issues.
Many employers overlook the fact that a simple adjustment to their bank account or accrual schedules can completely throw off their payroll. Remember any policy changes at the company level, need to be relayed to the payroll processor to make the appropriate adjustments. These reminders could save a headache or two during one of the busiest times of the year.
Adjustments that will affect payroll include the following:
- Changing of banks or accounts
- Variation of payroll frequency or movement of check dates
- Changes or updates to employee deductions (this can relate to the type of deduction, tying to a particular W-2 box, etc.)
- Employee pay grade changes
- Vacation/Sick/Holiday policy changes
- General ledger changes
If you also have a time and attendance system, please note any changes to the employee accruals or 2014 holiday schedules will also require adjustments.
As a best practice, it is suggested employers looks over their payroll reports after each pay to verify the information is accurate before taxes are filed. To make life easier, run payroll reports on the company and employee level constantly to review information.
Feeling overwhelmed? It’s important for employers to stay compliant with payroll and human resource management. Working with a trusted payroll provider can help alleviate the burden of payroll and common year end mistakes like the ones mentioned above. MPAY has an extensive network of professional providers across the U.S. that can help employers start 2014 off right. As always, please be sure to subscribe to our blogs for more tips on best practices throughout the year.