Year-End Payroll Checklist for Small Business Owners
As the year winds down, payroll can quickly become one of the most stressful parts of closing your books. Between final pay runs, bonuses, and W-2 prep, there’s a lot to check off and a lot that can go wrong if you’re not ahead of the curve.
That’s why we created a simple year-end payroll checklist to help you stay compliant, reduce errors, and start the new year on the right foot.
Whether you handle payroll in-house or use a provider, now’s the time to review your records, catch any inconsistencies, and get ahead of what’s coming in January.
1. Verify Employee Info
Before you generate W-2s, double-check that employee data is accurate and complete.
Names and Social Security Numbers match IRS records
Current addresses are on file
Employee classifications (W-2 vs. 1099) are correct
Terminated employees are properly marked in your system
Why it matters: Small errors here can delay W-2 processing and create issues with IRS or SSA filings.
2. Review Wages and Withholdings
Make sure year-to-date payroll data is accurate.
Are wages, bonuses, and reimbursements correctly categorized?
Have all fringe benefits (like personal use of a company vehicle) been properly recorded?
Were any manual checks or corrections fully accounted for?
At L&L, we review payroll reports line by line to ensure that year-end totals align with the actual payments made and filed.
3. Reconcile Payroll Tax Filings and Deposits
Run a final reconciliation between payroll tax liabilities and what’s been paid.
Compare Forms 941 (quarterly) to year-to-date totals
Check that federal and state tax deposits match payroll reports
Ensure all state/local filings have been submitted
Tip: This is where many businesses uncover discrepancies, especially if they use a third-party payroll provider and don’t regularly review their filing history.
4. Plan for Bonuses and Special Pay
If you’re issuing holiday bonuses or year-end commissions, now is the time to plan them.
Decide whether bonuses will be grossed up (to cover taxes)
Schedule payment dates
Confirm whether bonuses should be processed in the current year or next year
Remember: Bonuses are taxable income and must be reported on W-2s.
5. Prep for W-2s and 1099s
Start gathering the information you’ll need for year-end tax forms.
Confirm employee and contractor info is accurate
Make sure any contractor paid over $600 is flagged for a 1099
Set deadlines with your payroll provider for W-2 and 1099 filing
Don’t wait until January. These deadlines sneak up fast, and mistakes can trigger penalties.
6. Schedule a Year-End Payroll Review
We always recommend scheduling a year-end payroll review, especially if:
You’ve switched payroll providers this year
You’ve added or terminated team members
You’re not sure if previous filings were accurate
You’ve handled any payroll corrections or amendments
We’ll help you walk through a final payroll health check to make sure your books are clean and reports are ready.
Thinking About Changing Payroll Providers?
If you’re considering switching payroll providers, early December is the time to start. Transitioning payroll takes planning, and waiting until January can create unnecessary stress or missed filings.
Before making the move, make sure you:
Gather all payroll data and employee information
Set up your new system before the first January payroll run
Confirm that your current provider will complete all year-end tasks, including Q4 reports and W-2 filings
Sometimes it’s best to keep your existing payroll subscription active through January to ensure all annual filings are finalized.
At L&L, we’ve helped many clients make this transition smoothly. We collect all employee details, filing frequencies, government account numbers, and tax rates, then program everything into the new system so you’re ready to go when the new year begins.
Want a Printable Version?
We’ve compiled everything in this article into a simple, scannable checklist. Download the free PDF checklist here.
Avoid Surprises. Start Strong.
Year-end doesn’t have to be stressful, as long as you’re organized, ahead of deadlines, and supported by the right team.
If you want help reviewing your payroll setup or navigating your final filings, L&L Bookkeeping is here to help.
Book your free exploratory call today and make year-end a little easier.