Year-end is finally in the rearview mirror, employees have filed their personal tax returns, and Q1 is just about wrapped up. For payroll and tax professionals, it’s time to gear into autopilot, and count down the days to summer vacation, right?
Not quite yet.
The mid-year lull is a time when all the running around has ceased, and payroll becomes predictable again. It’s also the best time to be proactive and take steps to ensure a smoother ride for the next year-end period. Here are a few practical tips that can alleviate headaches down the line.
1. Conduct a Postmortem
It might be hard, but try to stop thinking about that upcoming summer vacation and put yourself back in year-end mode. What caused you the most hardship? What earnings did you forget about until January? Are those disability notices piling up again? Was there a rate change you missed that caused a large quarter end collection? Reflecting on past struggles will prepare you for a smoother year ahead.
2. Confirm Employee Personal Info
Filing W-2Cs is no fun. Avoid it next year by confirming your employee information now rather than later. Send your team a memo asking them to review their names, addresses, and social security numbers on record in your HRIS or payroll system. Keep in mind that updating the social security number is not just a change to the Form W-2—it’s also used for quarterly unemployment and disability filings. Without that number on file accurately, an employee could have trouble filing for unemployment as their employment history would be incomplete.
After trying to file their personal tax returns, longtime employees would have likely noticed if they were being taxed in the wrong state. But what about new or recently relocated employees? Let your employees know that now is the best time to make corrections. Reviewing these items now are pivotal to a clean quarter and year-end. Prioritizing this now can avoid costly amendments in the future.
4. Log Imputed Income
One final item to keep on your radar is payments made outside of your regular payroll. Stock payments, moving expenses, and other imputed income can sometimes go out the door quicker than you have a chance to record it. Keep a log of these items, and make sure you record them as soon as possible. While the payments might have been made, the taxes for those payments still need to be recorded. Missing these can result in late deposits if you delay their recording across years.
Before you start packing your bags for Bora Bora, take a step back and review your payroll. If you use a payroll service provider, work with them to ensure you don’t get caught off guard while lounging on the beach or during the dreaded year-end scramble.
Then, and finally then, you can relax. You’ve certainly earned it.