Entering the final quarter of the calendar year means anticipating end-of-year payroll processing. This is the time of year when payroll professionals start thinking about what they are going to do come January. Those who are most prepared are the same ones who took decisive action in the final quarter of the previous year.
Knowing what we know about end-of-year payroll processing, there are two areas employers can concentrate on to minimize problems. These are W-2 and Affordable Care Act (ACA) compliance. BenefitMall, a Dallas company that provides payroll and benefits administration services to companies all over the country, recommends the following three tips:
1. Check and Update W-2 Information
We hear it every year, yet so many companies fail to follow through on advice to check and update W-2 information before the final payroll run for the year. Inaccurate information on W-2 forms seems like such a minor and inconsequential thing until a company finds itself in the cross hairs of the IRS and SSA for filing inaccurate forms.
Avoiding problems is as simple as checking the accuracy of employee names, addresses, and Social Security numbers. Companies can do it by having HR personnel interview every employee face-to-face. They can also give employees access to their information online, requiring them to check and verify that information.
Failing to verify information could mean filing incorrect W-2 forms. That could lead to fines of up to $50 per incorrect form filed prior to the annual deadline. Incorrect forms filed after the deadline but prior to August 1 could result in penalties of up to $110. That number jumps to $270 for every incorrect form filed after August 1.
2. Address W-2 Adjustments
As long as we are talking W-2 forms, BenefitMall also recommends addressing all end-of-year adjustments prior to your final payroll run for 2019. Payroll professionals should be examining records to make sure all compensation has been properly reported and taxed.
In addition to standard wages, employers should be looking at the following types of compensation:
- Qualifying life insurance contributions
- Paid parking and transportation benefits
- Company car benefits for personal use
- Incentive pay, including bonuses
- Third-party sick pay
- Certain moving expense reimbursements
- Certain business expense reimbursements
- All non-cash payments.
The point of reviewing these sorts of things and making W-2 adjustments is to ensure that the final numbers on the W-2 are accurate when forms are filed. Inaccurate information is subject to penalties.
3. Annual ACA Reporting
One last thing that payroll professionals can do in preparation for end-of-year payroll is to consider annual ACA reporting. Remember that even though the individual mandate was eliminated at the start of 2019, the employer mandate still remains intact. Employers are still required to offer employees qualifying health insurance plans under the ACA.
Now is the time to determine if your company needs to report and, if so, the form for doing so. Companies with 50 or more employees will be filing 1094-C and 1095-C forms. Self-insured companies with fewer than 50 employees must complete forms 1094-B and 1095-B.
Companies with fewer than 50 employees and no insurance are not required to report anything. Those fully insured by a private insurance company can leave reporting to that provider. One of the keys to figuring this all out is to understand what is considered a full-time equivalent employee under the ACA rules.
Your final payroll run for the year will be here before you know it. Now is the time to start preparing so that you are not caught off guard when the calendar turns to January.