Year-End Payroll Checklist for Small Businesses

Closing out the year means more than celebrating the holidays — it’s also when payroll deadlines and reporting requirements stack up fast. Missing a filing or sending incorrect forms can trigger IRS penalties and unhappy employees. This Year-End Payroll Checklist will guide you through everything you need to finish payroll strong and enter tax season prepared. You can also download the printable PDF version.

Step 1 – Verify Employee & Contractor Information

• Confirm employee names, Social Security numbers, and addresses.
• Update contractor records with legal names and Taxpayer Identification Numbers (TIN).
• Ensure all changes (address, marital status, exemptions) are reflected in payroll system.

Step 2 – Reconcile Payroll Records

• Match payroll ledgers against bank records.
• Confirm totals for gross wages, taxes withheld, and employer contributions.
• Verify year-to-date (YTD) totals in payroll system match filed tax deposits.

Step 3 – Prepare W-2 and 1099 Forms

• Generate W-2 forms for all employees.
• Generate 1099-NEC forms for contractors paid $600 or more.
• File W-2s with the Social Security Administration (SSA).
• File 1099s with the IRS.

Step 4 – Submit Annual Filings

• File Form W-3 with the SSA (transmittal for W-2s).
• File Form 1096 with the IRS (transmittal for 1099s).
• Submit Form 940 (FUTA Annual Return).
• Double-check state-level year-end requirements.

Step 5 – Review Benefits & Deductions

• Reconcile health insurance and retirement plan contributions.
• Ensure flexible spending account (FSA) or health savings account (HSA) balances roll over or reset correctly.
• Verify year-end bonuses are processed and taxed correctly.

Step 6 – Prepare for Next Year

• Review payroll tax rate changes for the upcoming year.
• Update employee withholding elections (new W-4s if requested).
• Refresh payroll schedules and holiday calendars.

Download the Year-End Payroll Checklist PDF

Get the printable version here: Download Year-End Payroll Checklist PDF

FAQs

When are W-2s due to employees?
Employers must provide W-2s to employees by January 31.

Do I have to send 1099s to contractors?
Yes, if you paid $600 or more in a calendar year, you must issue a 1099-NEC.

What if I discover payroll errors at year-end?
Correct errors promptly with amended filings (Form W-2c for employees, corrected 1099s for contractors).

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Related Checklists

If you’re handling payroll for multiple states, you may also need our Payroll Tax Compliance Checklist and Payroll Recordkeeping Checklist