At the end of a calendar year, you may be looking for assistance in handling year-end payroll matters. Here is a helpful checklist of some common, yet perhaps overlooked, items that you may reference as you process your final payrolls this year and prepare W-2/1099 forms.
“Enter Final Adjustments and Payroll Data for the Year
In addition to your normal employee data verification procedures, you will want to verify that all special wage, tax, and benefit data items are reported. This may include items such as:
- Employer Contributions
- Deferred Compensation
- Cash Bonuses
- Auto Allowances
- Moving Expenses
- Use of Company Vehicle
- Tip Allocation
- Third Party Sick/Other Pay
- Required Backup Withholding (verify amounts)
- Stock Options – Including Disqualifying Dispositions, Incentive Stock Options, Restricted Stock, and Employee Stock Purchase Plans (ESPP)
- Any other forms of taxable compensation, or taxable non-cash fringe benefits not previously processed through payroll
- Benefi premiums for same-sex spouse when in states that do not recognize state-level tax exemption
- Adult Child Healthcare coverage costs
Verify Employee Personnel Record Information
Each employee should verify their name, address, and Social Security Number as listed on the Employee Personal Record or pay stubs and notify HR (via EAN) of any needed changes prior to the finalization/printing of W-2/1099 forms. Managers should also verify that the mailing address for any terminated employees is still correct for the mailing of forms W-2s, 1099s, and 1095-Cs.
Contribution Setup for Patient Protection Affordable Care Act (PPACA)
The IRS requires additional information be provided by the employer, specifically Forms 1094-C & 1095-C. Your organization may have benefit plans with a unique setup that require an update to the connected employee and employer contribution codes. Employers should review the IRS guidelines for the Patient Protection Affordable Care Act (PPACA) and ensure that the respective employee and employer contribution codes are set up to be reported in W-2 box “12” with code “DD” on the employee’s W-2 form.
In the ExponentHR system, this can be done by adding the applicable W-2 Box/Code reference (12 and DD) to the Employee Deduction code and the ER Contribution code respectively through the Company Codes utility. Updating these codes prior to the approval of W-2s will result in this being reflected on the W-2s for the concluding year and your organization remaining in compliance.
Report any Adult Child Healthcare Coverage Costs
While the IRS has deemed Adult Child coverage cost to be tax-exempt, some state and local tax jurisdictions have not yet adopted the same preferential treatment. In these situations, it is appropriate for your organization to report a portion of the employee’s health care costs as a non-cash taxable benefit to these selective jurisdictions prior to the end of the calendar year. This can be done through ExponentHR by making an adjustment using an earnings code set up with the “Adult Child Health Coverage” Pay Class non-cash earnings option.
Report any 457(b) Contributions
Section 457(b) plan employee contributions are to be reported on Form W-2. When editing the regular deduction and employer contribution codes (“EE” for ROTH) that are used to report these contributions, set the W-2 Box 12 code as “G”.
Record any Third-Party Sick Pay
To reconcile a Form W-2 containing paid third-party sick pay with employment tax returns, the IRS requires the filing of Form 8922 (Third-Party Sick Pay Recap). Generally, if an employer has elected tax-filing services from their Third-Party Administrator (TPA), and the TPA prepares and files W-2s on behalf of the employer, the employer will be responsible for filing Form 8922.
As a courtesy, ExponentHR will prepare and file Form 8922 upon request for organizations meeting the criteria for filing. To facilitate the timely completion and submission of Form 8922, ExponentHR must receive the year-end reporting package(s) provided by each Third-Party Administrator utilized by your organization. This is to be forwarded to ExponentHR upon receipt and include the year-end reporting summarized to include all employees and total applicable wages and taxes. If needed, please contact the Enterprise Services Team to request a template that will assist with the compilation of the data.
With these items or any other scenarios that arise, our Enterprise Services Team is available to guide you through the steps and work towards a prompt resolution together.