It's that time of the year to wrap up 2023 payroll duties. Here are a few reminders to help you close out your payroll for the year.
Late November/Early December:
Remind employees that if there has been a change in their filing status (e.g., due to marriage, divorce, or dependents), they may want to file a new W-4 and state tax form for 2024.
Compare the previous W-2 with the gross wage report and look for justifications for increases or changes in wages (e.g. approved salary increases).
Confirm that employee name, address, date of birth, and Social Security numbers are correct.
Verify all employees are taxed in their correct state.
Before your last payroll of 2023:
For tax purposes, checks or electronic payments of wages paid in 2024 are generally 2024 wages, even if earned in 2023.
Check all Social Security tax withheld. If any employee exceeded the 2023 limit, make an adjustment or refund before making your final tax-year 2023 deposit.
Verify that all special wage payments and adjustments are correctly posted to 2023 earnings before processing 2023 W-2s. These may include:
Non-qualified relocation expense reimbursement
Group term life insurance in excess of $50,000
Third-party sick pay if the employer has responsibility
Manual or voided paychecks not in the payroll system
Personal use of company vehicles, parking, and/or company-provided transportation
Company-paid educational assistance
After your last payroll of 2023, but before the first payroll of 2024:
Process W-4s submitted for 2024.
Review discrepancies such as missing addresses and missing Social Security numbers.
Check for excess contributions to qualified plans, including 401(k), 403(b), especially for highly compensated employees.
2024 Employee Contribution Limit: $23,000
If the employee is age 50 and older, they’re eligible for an additional $7,500 in catch-up contributions, raising the employee contribution limit to $30,500.
Check accumulators – Make sure the year-to-date numbers are zeroed out.
Review applicable state/local minimum wage changes.
Schedule any special bonus payrolls.
Verify that the new year month-end close-out dates are accurate.
Confirm that for the new year, the schedule of pay dates, period ending dates, and quarter closing dates are as intended and do not fall on holidays or weekends. If the end of the calendar year coincides with benefits policies resetting, inform employees about unused benefits.
Vacation, sick days, or personal leave time: Annotate any remaining paid time off and communicate it to the employees so that they can schedule and coordinate leave time accordingly.
Flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) for medical costs and dependent care: Usually, FSAs have a use-it-or-lose-it feature. Advise employees about the terms of your plans and remind them in advance.
Record All Processed Paychecks
While you won't be able to finalize your annual payroll and tax numbers until after the final pay period, you can get a jump start on recording and verifying everything that has already been processed. Review previous pay periods to ensure that all amounts are logged accurately by verifying the following:
Employee wage amounts
Child support or other miscellaneous deductions
Disability or other benefits payments
Special tax exemptions that may have occurred throughout the calendar year
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, eligible employers may have deferred the employer portion of Social Security taxes through the end of 2023. If your organization opted to take advantage of this relief measure, you'll also need to verify the deferred amounts, which can affect the amount of taxes due in 2024.
If you have any questions, please do not hesitate to contact Kiwi Partners' HR Services team.