A year-end payroll checklist ensures you close the books accurately and meet all filing deadlines. The critical window runs from November through January: verify employee data, reconcile payroll records, file W-2s and 1099s by January 31, and update tax rates for the new year.
- Start preparing in November — January is too late
- W-2 and 1099-NEC deadlines both fall on January 31
- Update all tax rates and contribution limits by December 15
Year-End Timeline (November - January)
| Month | Tasks |
|---|---|
| November | Verify employee SSNs and addresses; reconcile YTD payroll with quarterly 941s; request updated W-9s from contractors; open benefits enrollment |
| December | Process bonuses and special payments; update payroll system with new tax rates; finalize benefits elections; process last payroll of the year; verify PTO balances and carryover |
| January 1-15 | Run final payroll reports; generate W-2 and 1099 drafts; review for errors; send to employees/contractors |
| January 31 | File W-2/W-3 with SSA; file 1099-NEC with IRS; file Q4 Form 941; file Form 940; furnish all copies to recipients |
Put every deadline in a shared calendar with reminders set 2 weeks before each due date. Assign specific team members to each task and track completion. Missing even one deadline can trigger penalties.
W-2 Preparation
Verify Employee Information
Reconcile YTD Totals
Review Box 12 Codes
Generate and Distribute W-2s
1099 Preparation
Identify All 1099 Recipients
Verify W-9 Information
Generate and File 1099s
Tax Rate Updates for the New Year
Before running the first payroll of the new year, update your payroll system with any changes:
| Item | What to Check | Source |
|---|---|---|
| Social Security wage base | New annual cap | IRS announcement (usually October) |
| Federal income tax brackets | Inflation-adjusted brackets | IRS Revenue Procedure |
| Standard deduction amounts | Updated for W-4 calculations | IRS Revenue Procedure |
| State tax rates | New rates, bracket changes | State revenue department |
| SUTA rates | Experience-rated changes | State unemployment office |
| FUTA credit reduction states | New credit reduction list | IRS (November announcement) |
| Minimum wage | Federal and state increases | DOL and state labor department |
| 401(k)/IRA limits | Contribution limit changes | IRS announcement |
| HSA/FSA limits | Contribution limit changes | IRS Revenue Procedure |
| Mileage rates | Standard mileage rate | IRS announcement (December) |
After updating tax rates, run a test payroll to verify calculations are correct before processing the first live payroll of the new year. Errors in the first payroll compound through the rest of the year.
Benefits Enrollment
Open enrollment typically runs in November-December for a January 1 effective date:
After enrollment closes, update all benefit deductions in your payroll system before the first payroll of the new year. Verify that new deduction amounts match the employee's elections.
Archive and Record-Keeping
After closing the year, archive all payroll records securely:
| Record Type | Minimum Retention | Authority |
|---|---|---|
| Payroll registers and reports | 7 years | Best practice (covers all requirements) |
| W-2 copies (Copy D) | 4 years | IRS |
| 1099 copies | 4 years | IRS |
| 941 / 940 filings | 4 years | IRS |
| Employee earnings records | 4 years | IRS / 3 years FLSA |
| Timesheets and time records | 3 years | FLSA |
| I-9 forms | 3 years from hire or 1 year after termination | USCIS |
| Benefits records | 6 years | ERISA |
Store archived records in encrypted digital format with secure backups. Physical records should be in a locked, climate-controlled storage area. Create a destruction calendar to securely dispose of records that have passed their retention period.
Frequently Asked Questions
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