What is a Payroll Year-End And How Can You Prepare For It?

Payroll year-end is the process all companies go through at the end of their financial year. Businesses are required to finalise and properly submit all data related to payroll to the tax authorities.

The purpose of submitting this information is to ensure that all employees are taxed properly, according to legal tax regulations.

There are several tasks that need to be performed at this point in order to ensure that a company is compliant with tax laws – from generally making sure that all finances and payments are correct and up to date to properly reporting employee benefits.

How to Prepare for Payroll Year-End

Preparing for payroll year-end is all about getting your affairs in order in time for the end of the financial year. Naturally, since it includes a whole lot of legal requirements and your finances, it can be quite daunting.

Here are the most important things that you need to consider for your payroll year-end.

Finalise All Payroll Processing

First and foremost, you need to properly and meticulously check that all your payments are up to date and have been completed properly. This means regular salaries as well as employee bonuses, overtime, deductions and anything else that may affect what your staff have been or are going to be paid.

Even if you think everything is sorted and up to date, it’s always worth going back and double-checking, just in case you’ve missed something.

Create Year-End Reports

Once you’re confident that all your payments are sorted and up to  date, it’s time to create your year-end reports. Depending on your location and business, this includes things like P60s or W-2s (in the UK and US respectively). This reports act as summaries of your employees’ earnings and deductions through the year.

Once they’re complete, these forms are given to each employee as well as the tax authorities, so it’s really important that they’re up to date and correct.

File Your Tax Returns

With all your affairs in order and official records and forms up to date, you need to file your tax returns. This shows just how much tax has been withheld from your employees and paid to the government (as mandated by tax law).

Tax returns are done differently from one country to the next, via different agencies. In the UK, it’s done via His Majesty’s Revenues and Customs (HMRC) and in the US, it’s done via the International Revenue Service (IRS).

Report Employee Benefits

Not only do all employee financial records (related to the business) need to be recorded and submitted, but companies are also required to report any and all employee benefits.

Employee benefits will differ from one company and one employee to the next, but they may include things like contributions to health insurance or retirement funds, for instance.

Whatever the benefits may be, they all need to be accurately recorded for each employee and reported in payroll year-end documentation.

Prepare for the New Tax Year

One of the most important things to do when finalising the end of one tax year is prepping for the next year.

The most important way that you’ll do this is obviously getting everything sorted for the current year so you can start fresh.

But, in addition to that, you also need to check if there are any new tax rates or allowances and make sure you’re in the loop with any changes in regulations for the upcoming year.

Why It’s Essential That You’re Properly Prepared for Payroll Year-End 

The most obvious reason why it’s so important that you’re up to date with your payroll year-end is for legal reasons. Not only will you be in trouble with the law if you’re not totally compliant, you may also face other penalties, including financial fines and more.

But, there are other reasons too:

• Accurately record all employee records.
• Keep staff happy.
• Go through your records and double-check for errors.
• Review and improve your financial planning.
• Start the new year from afresh.

So, both in terms of legal standards and general organisational, it’s really important that you’re completely prepared for the payroll year-end.