This year has passed more quickly than anyone ever expected. Isn’t that how it always goes? As a result, companies need to start gearing up for year-end sooner rather than later. This period is one of the most important for payroll leaders as it signals the culmination of 12 months worth of employee payment and tax responsibilities. PTM has the inside scoop on how organizations can best prepare for year-end compliance as 2016 comes to a close:
Verify employee data
Companies are required to send copies of W-2 forms both to workers and the Social Security Administration. It’s crucial that the information contained in these documents is accurate for payroll teams to avoid costly federal penalties. Prior to submitting this paperwork – either electronically or via paper mail – organizations should verify that all materials are indeed correct. This data includes Social Security numbers, retirement plan data and employee names as well as wage, tax and benefits information.
Mark the date
In December 2015, the Protecting Americans from Tax Hikes Act was passed by Congress. As a result, companies will be required to send W-2 forms to employees and the SSA by January 31 for the previous tax year, starting with the 2016 forms. That means this year’s documentation will be due Jan. 31, 2017. Due to the previous years’ deadlines falling on a Saturday, Sunday or legal holiday, the submission dates for 2014 and 2015 were February 1 and 2, respectively, according to Forbes. That additional time gave businesses more opportunities to ensure their documentation was accurate.
Now that the deadline has returned to Jan. 31, organizations need to verify their submissions as early as possible. The PATH ACT does have a safe harbor element, however, if the errors made on the forms are minimal. According to CFO Daily News, those penalties are:
- Withholding mistakes: up to $25.
- Other errors: up to $100.
While these amounts may seem small, they can add up depending on the number of faults found within the W-2 forms. It’s critical for payroll leaders to be mindful of these expenses as well as the deadline itself.
Update payroll software
No one expects things to go wrong at year-end, especially if technology has been working efficiently for the entire year. Payroll leaders don’t want to be surprised, however, if any errors do arise. To reduce the chance of these occurrences, companies should make sure their payroll solution has completed any and all updates prior to getting down to work. Businesses that have an on-premises system will have to perform these upgrades themselves, so it’s critical that they give their software ample time to implement and utilize the new features.
For companies with cloud-based payroll solutions, on the other hand, these updates will be introduced automatically.
The responsibilities that correlate with year-end require dedicated attention from businesses and their payroll teams. By verifying employee data, being mindful of the W-2 form deadline and updating payroll software, organizations can ensure all of their duties are completed in a timely manner.
The upcoming IPPA Business Excellence Conference – held Sept. 21-23 in New Orleans, Louisiana- will feature a helpful session on payroll end-of-the-year compliance. PTM will be in attendance at the event to provide additional insight and instruction as to how businesses can prepare for these important duties and deadlines.