As the year comes to a close, many business owners find themselves juggling holiday rushes, final sales goals, and strategic planning for the new year. But there’s one area that often gets overlooked… payroll. Whether you process payroll in-house or use a service provider, year-end is a critical time to tie up loose ends and prepare for upcoming reporting deadlines.
To help you stay compliant and avoid costly mistakes, here’s a practical year-end payroll checklist every employer should complete before December 31.
1. Verify Employee Information
Before you finalize your payroll records for the year, double-check that all employee information is current and accurate; especially names, addresses, and Social Security numbers. Incorrect or outdated information can cause delays or rejections when you file W-2s and payroll tax forms. Send a quick request to employees asking them to confirm or update their details before year-end.
2. Review Wages, Benefits, and Deductions
Make sure all wages, including bonuses, commissions, and tips, have been included in your payroll reports. Double-check benefit deductions as well, such as retirement plan contributions, health insurance premiums, and HSA or FSA withholdings.
Confirm that year-to-date totals in your payroll system match what you’ve paid and withheld. Any discrepancies could cause issues when you file 2025 tax documents.
3. Process Year-End Bonuses Correctly
If you’re planning to give end-of-year bonuses, make sure they’re properly recorded and taxed. Bonuses are considered taxable wages, so factor in federal, state, and local tax withholding when paying them out. Consult your advisor to determine if issuing bonuses before year-end could reduce taxable income for your business.
4. Prepare for 1099 Filing (if Applicable)
If you’ve paid independent contractors $600 or more during the year, you’ll need to file Form 1099-NEC in January and deliver a copy to each contractor. Make sure you’ve collected a completed Form W-9 from every vendor or contractor before the end of the year.
5. Run Final Payroll Reports for the Year
Download and save copies of your year-to-date payroll summary, tax liability reports, and employee earnings records. These will help you (and your accountant) review annual totals and make any adjustments before tax filings are due.
This is also a smart time to review accrued vacation or PTO balances if you offer them, especially if they don’t carry over into the next year.
6. Keep an Eye on Tax Deadlines in January
Here are a few important dates to remember after year-end:
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January 31, 2026: Deadline to provide W-2s to employees and 1099s to contractors
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January 31, 2026: Deadline to file Forms W-3 and 1096 with the IRS
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January 15, 2026: Due date for final quarterly payroll tax payments (Form 941)
7. Stay Ahead of 2026 Payroll Changes
As you wrap up 2025, take some time to look ahead. Will retirement plan limits change? Are there updated minimum wage or payroll tax rates in your state? Planning ahead can help you enter the new year fully prepared.
Need Help With Year-End Payroll?
If you’re feeling overwhelmed or unsure whether your payroll is complete and compliant, you’re not alone — and you don’t have to do it all yourself. Our team works alongside business owners to help with payroll reviews, year-end adjustments, and tax filing prep.
Let’s make this year-end smoother and set your business up for a successful 2026. Contact us today to get started.