Payroll: Starting the Year Off Right
The beginning of the year is both a welcome refresh from the previous year’s events and a stressful reminder that you have to start many of your in-house processes from scratch again.
While calibrating your payroll for the coming year probably isn’t something you’re looking forward to, starting your year with an optimal payroll setup will help streamline your business and avoid fees.
Here are a few suggestions you’ll need to start your year off correctly.
Updating Software and Hardware
At the beginning of the year, you have a few options that can make your life easier—namely, switching to a new payroll service or outsourcing any needs you aren’t equipped to handle for now. Even if your current payroll service only needs updating, doing it before your year fully kicks off will save you a massive headache come tax season.
Naturally, you’ll want to start the process of switching over to a new service around a month before you need the service in action. For example, you might give your current company notice of termination at the beginning of December and then contact your preferred payroll group shortly thereafter. This will both give you time to close any outstanding fees with your current payroll company and ensure that your new one has time to get set up.
Payroll software isn’t the only thing you should update before your year starts, however. Computer software, in-office hardware, and posted regulations should undergo any major updates well in advance so that you can iron out any bugs before your employees come back for the new year. This can be a lengthy process, so plan accordingly.
Updating Resources
There are virtually endless resources you might need to bring up to date before starting your year, so checking in with HR is a good place to start. Things you might need to update include the employee handbook for new and old hires alike, employee information, and documentation of any pertinent regulations that have changed or become relevant in the last few months.
In particular, you’ll want to ensure that your employee information is correct. It’s a good idea to audit your employees for addresses, tax plans, and other identifying criteria that needs to be accurate if you want to avoid fees; this will also prevent you from sending important information such as paystubs and benefits documents to the wrong location.
Another area to focus on is your in-house décor—in this case, legislation posters. Your state probably requires you to have certain notices—e.g., workplace discrimination, safety, and minimum wage posters—mounted in work areas and other common locations. These change each year, so check with your HR department to determine what you need before starting up again.
Exempt vs. Non-Exempt Employees
It’s extremely important to know which of your employees qualify as exempt and which ones do not. Exempt employees are typically salaried and thus cannot receive overtime pay, while non-exempt employees are usually paid hourly and thus are eligible for time-and-a-half once they go over the traditional 40-hour week. The IRS tends to crack down on employers who mess this up, so classify your employees early in the year to avoid fees or unwanted audits. This is especially important in 2020 due to the new overtime laws that go into effect January 1st.
W-2s vs. 1099-MISCs
It can be difficult to keep track of your employees’ statuses, but having the correct documents on-hand for your employees to access will prevent you from accidentally misclassifying them. As a reminder, your salaried and/or full-time employees will receive W-2s listing their withheld taxes and benefits; in contrast, your contractors will only receive 1099s, which list the amount you’ve paid them. Going over this distinction with employees at the beginning of the year can help mitigate some of the confusion.
You may have some overlap between your full-time employees and employees who contract in a specific area. If so, make sure you don’t issue both their W-2s and their 1099s to the same employee identification number, as doing so can result in an inquiry courtesy of the IRS.
As with any year, the IRS will most likely make some changes to the stipulations around these two forms. It won’t hurt to check the IRS’ website to make sure you’re still compliant—otherwise, you run the risk of accruing fees.
Deadlines and Fees
You should already have a functional payroll calendar for the coming year, but it won’t hurt to go back over it with your new (or current) payroll consultant to ensure that you haven’t missed any important deadlines. Additionally, go over your list of pending fees and make sure you don’t have a debt to settle with your former payroll company if you’ve recently switched.
The beginning of your year will always be stressful, but adjusting your payroll so that you’re ready for 2020’s hurdles will substantially improve your outlook—and your company’s compliance.
For more information on how you can optimize your year’s payroll, call Abacus Payroll at (856) 667-6225 today!
