As we turn our calendars to 2025, let's set the tone for a
Here are a few simple yet effective payroll steps to
1. Verify employee information
It's a simple thing that's easy to overlook, but confirming your employees' information can save you time, money and frustration later. Ask your employees to take five minutes to double-check that their reported information, such as their Social Security number and address, is correctly entered into your system and that any updates are captured.
2. Double-check your employer information
Like with your employees, verifying your organization's information is essential. Confirm if you've had any entity changes, such as your Federal Employer Identification Number (EIN), legal name or address, as those can impact wages and tax liabilities. Additionally, state and local EINs are required to file electronically — which is required by most agencies nowadays — so make sure you have EINs confirmed as well.
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3. Review payroll policies
Federal and state regulations can change frequently, and the beginning of the year is a great time to review these regulations and ensure that your organization is still in compliance. Noncompliance can mean penalties or fines for your organization, so it's important to make the necessary adjustments as the new year starts so your organization can continue running smoothly.
4. Update tax rates and benefits
Like federal and state regulations, tax rates can change in ways that may impact your payroll for the year ahead. Make sure you're aware of any changes and update your withholdings appropriately. Any changes your organization made to employee benefits in 2024 may impact payroll, including 401(k) contribution changes and health insurance costs. Be sure to review any benefits changes that occurred in 2024 and ensure that they are reflected in payroll accordingly.
5. Complete appropriate tax forms
Now is the perfect time to see if your company qualified for any tax credits in 2024, such as the Work Opportunity Tax Credit. Complete all appropriate forms for relevant tax credits so you're prepared for the start of tax filing season.
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6. Check for payroll errors
Be thorough in checking for payroll errors and correct any discrepancies or mistakes you identify. A small error, such as an incorrect check that needs to be voided or pay adjustments, can become a bigger problem later if left unnoticed. Take the time to review this information now to avoid costly and troublesome corrections down the line.
7. Company gifts
A commonly overlooked area of payroll is company gifts. Confirm that any gifts your organization received are correctly tracked in payroll so you can properly gross up your earnings.
8. Plan for W-2 and 1099 reporting
Form W-2s and 1099s must be remitted to employees by January 31, 2025, to file annual tax returns, so it's crucial that you have a plan in place for how W-2 distribution will occur. Do you plan to mail the forms to employee homes, make them available electronically, or both? Whatever option you choose, communicate these details with employees so they know exactly where to find these critical tax documents.
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9. Include any fringe benefits on W-2s
Certain fringe benefits, such as personal use of a company car, employee gifts in the form of tangible items and services, and employer HSA contributions are taxable and need to be reflected on your employees' W-2 forms.
As we begin 2025, paying attention to these small details can make a significant difference in ensuring your business has an accurate payroll. A smooth first month sets the stage for a solid start to the new year, allowing you to focus on driving your business forward rather than catching up on the past.
