Year-end accounting reminders

Accounting year-end to-dos

With year-end approaching, review these key reminders and steps to take for year-end payroll and accounting compliance reporting.

Any person engaged in a trade or business, including a corporation, partnership, individual, estate, or trust, who makes reportable transactions during the calendar year, must file information returns to report those transactions to the IRS and furnish a copy of the information returns to recipients.

Submitting these returns makes it possible for agencies like the Internal Revenue Service (IRS) and the Social Security Administration (SSA) to track an individual’s tax liability. Some of the most common information returns include:

  • Form W-2 – Wage and Tax Statement (transmitted via Form W-3)
  • 1099 series, including Form 1099-NEC – Nonemployee Compensation and Form 1099-MISC – Miscellaneous Income (transmitted via Form 1096)
  • 1095 series – Affordable Health Care reporting (transmitted via Form 1094)

As another calendar year-end is upon us, here are some reminders for important steps to take for year-end payroll and accounting compliance reporting.

Gather your data

Gather all necessary information for year-end payroll reporting. Consider fringe benefits and payments made to employees through accounts payable. Some of the most common fringe benefits to include are:

  • Personal use of company vehicles by shareholders and employees
  • Health insurance for shareholders that own 2% or more of the company
  • Group-term life insurance provided to the employee in excess of $50,000

Do not forget to reconcile your bank accounts. This is an area where necessary adjustments can be uncovered.

Review your processes & data

Make sure you have everything you will need for compliance reporting. Order paper forms and supplies required for year-end reporting, including W-2s, W-3s, 1094, 1095s, and 1099s. Install any payroll or accounting software updates and/or patches, and then test your software to ensure there are no surprises.

Verify that employee and vendor information is correct for Form W-2, 1095-C, and 1099 reporting. Review vendor files and the vendor setup in your software systems. Every vendor file should include a Form W-9 signed by the vendor verifying its address, taxpayer identification number, and federal tax classification. This form will help determine whether the recipient is required to receive a Form 1099 and verify the vendor’s legal name, address, and identification number.

Process year-end data for compliance

Use the 1099 series of forms to report payments only when those payments are made in the course of your trade or business. Personal payments are not reportable. Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation) are not required to be reported on 1099-NEC or 1099-MISC.

Forms 1099-NEC should be issued to vendors for payments exceeding $600 during the year for services performed by someone who is not your employee. Examples include subcontractors, independent contractors, directors, legal, accounting, tax, consulting, and repair/maintenance services.

Generally, forms 1099-MISC should be issued to vendors for payments exceeding $600 during the year for rents, prizes/awards, other income, and gross proceeds paid to an attorney (not for services).

Wrap things up

January 31st is the magical due date. This is the deadline for W-2s to be provided to employees and the Social Security Administration (paper or electronic). Generally, it is also the deadline for providing 1099s to recipients. 1099-NECs must be filed with the IRS by the end of January. Most other 1099 forms are required to be filed with the IRS by the end of February if filing by paper and by March 31st if filing electronically.

Want to learn more?

AGH University offers year-end webinars that dive deeper into these topics and more. Sign up to receive email invitations for those webinars by selecting your relevant interests (payroll, etc.)

If you have specific questions or want to learn more, please contact Cindy McSwain using the information below. You can also view these additional IRS resources (links are for current versions which may be updated later in the year):

Cindy McSwain

Senior Vice President
Outsourcing Services

Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to joining the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned organizations.

Her current clients cross many industry sectors, including manufacturing and distribution, restaurants, retailers, medical and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.

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