Year-End Payroll Checklist for Small Businesses: What to Review Before the New Year
As the year winds down, small business owners are focused on closing out the books, planning for growth, and preparing for a fresh start. One area that deserves special attention—but often gets overlooked—is year-end payroll.
Taking time to complete a year-end payroll checklist can help small businesses stay compliant, avoid costly mistakes, and head into the new year with confidence. Here’s what every small business should review before the final payroll of the year.
1. Verify Employee Information
Accurate employee data is the foundation of correct payroll reporting.
Before year-end, review:
Employee names as they appear on Social Security cards
Social Security numbers
Current mailing addresses
Employment status (active or terminated)
Even small errors can delay W-2 processing or require corrections after forms are filed.
2. Review Payroll Records for Accuracy
Year-end is the best time to confirm payroll totals for the entire year.
Be sure to review:
Gross wages
Overtime pay
Bonuses and commissions
Tips (if applicable)
Federal, state, and local tax withholdings
Catching discrepancies now helps prevent amended filings and employee confusion later.
3. Confirm Payroll Tax Filings and Payments
Payroll tax compliance is one of the biggest risks for small businesses.
Before the year closes:
Confirm all payroll tax returns have been filed
Verify tax payments match what was reported
Address any notices received from tax agencies
Resolving issues before W-2s are issued makes year-end much smoother.
4. Prepare for W-2 and 1099 Reporting
January deadlines arrive quickly after the holidays.
Your year-end checklist should include:
Confirming which workers will receive W-2s
Identifying contractors who require 1099-NEC forms
Verifying wage and compensation totals
Being proactive helps ensure forms are delivered on time and filed correctly.
5. Review Benefits, Deductions, and PTO
Payroll includes more than just wages.
Before year-end, review:
Benefit deductions such as health insurance or retirement plans
Employer contributions
Garnishments or other deductions
Paid time off balances and carryover rules
This helps prevent payroll disputes and ensures clean balances in the new year.
6. Prepare for Compliance Changes in the New Year
Many payroll-related changes take effect on January 1.
Small businesses should review:
Minimum wage updates
Overtime or exemption changes
Paid leave or sick leave requirements
Making updates before the first payroll of the year helps avoid compliance issues and employee underpayments.
7. Communicate With Employees
Clear communication reduces confusion and last-minute questions.
Let employees know:
When W-2s will be available
How they can access their forms
Who to contact with payroll questions
This simple step can save time during a busy start to the year.
Why Year-End Payroll Matters for Small Businesses
Unlike larger companies, small businesses often don’t have a dedicated payroll or HR department. That means payroll errors usually fall directly on the owner—sometimes months later in the form of penalties or correction notices.
Completing a year-end payroll checklist helps:
Reduce compliance risk
Avoid costly corrections
Improve employee trust
Start the new year organized and prepared
Payroll may not be the most visible part of running a business, but getting it right at year-end protects both the business and its employees.
A little preparation now can make the new year smoother, more compliant, and far less stressful.
