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
