The Ultimate Year-End Payroll Checklist

Year-end payroll isn’t something to save for the last week of December. Businesses need to review payroll records, verify employee and contractor information, prepare tax forms, and meet federal, state, and local filing deadlines.

This guide walks through the key year-end payroll tasks small businesses should complete, from checking employee details to preparing W-2s and 1099s.

Small Business Year-End Payroll Checklist (PDF)

We’ve also included a printable year-end payroll checklist you can use to track your progress.

What Is Year-End Payroll?

Year-end payroll is the process of closing out your business’s payroll records for the year. This includes running final payroll, reviewing employee and contractor information, confirming wages and deductions, reconciling payroll taxes, and preparing required tax forms.

Year-end payroll usually starts in the fourth quarter and continues into the first quarter of the next year, when businesses must send forms such as W-2s and 1099s to workers and file required payroll reports with the IRS, Social Security Administration, and applicable state or local tax agencies.

What Do I Need For Year-End Payroll Reporting?

To complete year-end payroll reporting, you’ll need to prepare and file the required federal payroll and information returns for your employees, contractors, and business. The exact forms you need depend on who you paid, what taxes you withheld or owed, and whether you offered benefits such as health coverage.

Most employers need to prepare W-2s, W-3s, and quarterly or annual payroll tax returns. Businesses that paid contractors may also need to file 1099-NEC forms, while certain miscellaneous payments may require Form 1099-MISC. The IRS notes that 1099-NEC forms are due January 31, whether filed on paper or electronically, while 1099-MISC forms are generally due February 28 on paper or March 31 electronically.

Deadlines may shift to the next business day if they fall on a weekend or legal holiday. Employers should also check state and local payroll reporting requirements, since those deadlines may differ from federal due dates. The IRS employment tax due dates page is the best official starting point for federal payroll filing deadlines.

When Do You Have To Complete Year-End Payroll?

Year-end payroll starts in the fourth quarter, when businesses review payroll records, verify employee and contractor information, and prepare final payroll runs for the year.

Most core payroll deadlines fall in January. For example, employers generally must send Forms W-2 to employees and file W-2s with the Social Security Administration by January 31. Form 1099-NEC is also generally due by January 31 for businesses that paid qualifying nonemployee compensation.

Some payroll and information returns may have later deadlines, especially depending on the form and whether it is filed by mail or electronically. However, businesses should start year-end payroll tasks well before January so there is time to fix errors, collect missing information, and avoid rushed filings.

How To Complete Year-End Payroll In 10 Steps

Year-end payroll includes reviewing employee and contractor information, reconciling wages and taxes, preparing tax forms, and getting your payroll records ready for the new year. Here’s how to work through the process.

Step 1: Verify Employee, Contractor, & Company Information

Start by confirming that your business information is accurate, including your legal business name, employer identification number, payroll tax IDs, and filing information.

Next, review employee records for:

• Correct legal names
• Correct Social Security numbers
• Current mailing addresses
• Work and residence locations for tax purposes
• Updated withholding forms, if needed

For contractors, make sure you have a completed and accurate Form W-9 before preparing 1099 forms.

Step 2: Review Payroll Reports

Run payroll reports for the full tax year, typically January 1 through December 31. Review wages, deductions, tax withholdings, benefits, reimbursements, and employer-paid taxes to make sure your records are accurate before filing.

Useful year-end payroll reports may include:

• Payroll summary report
• Employee earnings reports
• Tax liability reports
• Retirement contribution reports
• Benefits deduction reports
• Paid time off reports
• Workers’ compensation reports

Fix errors before submitting tax forms or running your first payroll of the new year.

Step 3: Prepare W-2s & 1099s

Employers must prepare Form W-2 for employees and the appropriate 1099 forms for qualifying contractor or miscellaneous payments.

If you use payroll software or a payroll provider, these forms may be generated for you. If you file paper forms yourself, order official IRS forms early because photocopied forms may not be accepted for filing.

Step 4: File W-2s, 1099s, & W-3s

Employers generally must file Forms W-2 and W-3 with the Social Security Administration by January 31. Form W-3 is a transmittal form that summarizes the W-2s being filed; it is not filed separately for each employee.

Businesses that paid nonemployees $600 or more for services generally must file Form 1099-NEC by January 31. Form 1099-MISC has different deadlines: generally February 28 if filed by paper or March 31 if filed electronically.

You may also need to file state or local copies, depending on where your business operates.

Step 5: Send Tax Forms To Employees & Contractors

Employees must receive their W-2s by January 31. Contractors who receive 1099-NEC forms generally must also receive them by January 31.

If you deliver forms electronically, make sure employees or contractors have consented to electronic delivery and can access, download, and print their forms.

Step 6: File Year-End Payroll Tax Forms

Most employers also need to file year-end or fourth-quarter payroll tax forms. These may include:

• Form 941: Quarterly federal payroll tax return; Q4 is generally due January 31
• Form 940: Annual FUTA tax return; generally due January 31, or February 10 if FUTA deposits were made on time
• Form 943: Annual payroll tax return for agricultural employers
• Form 944: Annual payroll tax return for eligible small employers notified by the IRS

Do not file Form 944 unless the IRS has told your business to file annually instead of quarterly.

Step 7: Review Paid Time Off

Check unused PTO, sick leave, and vacation balances before the year closes. Depending on your state laws and company policy, you may need to carry over balances, pay out unused time, or apply accrual limits.

If you pay out unused PTO, include the payment in payroll and keep records for tax and accounting purposes.

Step 8: Process Year-End Bonuses

If your business issues year-end bonuses, decide when they will be paid and how taxes will be withheld. Bonuses are supplemental wages and should be processed through payroll.

Bonus deduction timing may depend on your accounting method and when the bonus is approved, accrued, and paid. Check with your accountant or tax professional if you’re unsure which tax year applies.

Step 9: Update Required Labor Law Posters

Review federal, state, and local workplace posting requirements before the new year. Some required posters change when minimum wage rates, paid leave rules, or other labor laws change.

The U.S. Department of Labor provides many required federal posters for free, and posting requirements vary by employer and law. State labor agencies may also provide free state-specific posters.

Step 10: Update Payroll For The New Year

Before running your first payroll of the new year, update payroll settings and employee records. Check for:

• New federal, state, or local tax rates
• Minimum wage changes
• Updated employee withholding forms
• New benefit deductions
• Retirement contribution changes
• PTO carryover balances
• Payroll schedule changes
• State unemployment tax rate updates

Once your updates are complete, share the new payroll schedule with employees and anyone responsible for payroll or HR.

The Bottom Line On Year-End Payroll

Year-end payroll is all about closing out payroll accurately: verifying employee and contractor information, reconciling wages and taxes, filing required forms, and preparing payroll records for the new year.

The process is manageable if your records are clean, but it can get time-consuming as your business grows. If year-end payroll feels like too much to handle manually, payroll software or a payroll service can help automate tax calculations, filings, W-2s, 1099s, and other year-end tasks.