Best Practices for End of Year
When you’re running a business, there’s a lot that happens at the end of the year. Navigating payroll, compliance, and taxes is not an easy task for anyone.
Our goal is to make End of year as easy as possible for you. Here are 8 tips you can take to ensure your End of year process is as smooth as possible. For more information and instructions on how to complete these tasks, make sure to check your End of year tasks in Justworks.
1. VERIFY EMPLOYEE INFORMATION EARLY
As a Professional Employer Organization (PEO), Justworks files in aggregate for our customers. This means that making a change to an individual employee or company’s taxes is more difficult once a filing deadline has passed.
Avoid errors by confirming the following information for each of your employees:
- Personal Details - The name, address, Social Security Number, and withholding allowances listed in Justworks are what we use to file for your employees. Double check to ensure everything is up to date so Forms W-2 are accurate. You and your employees should verify this information by December 18, 2020.
- FICA and FUTA Exemptions - If you have employees who are FICA and/or FUTA exempt, make sure you have them set as exempt in Justworks.
- >2% S-Corp Shareholder - Make sure all >2% S-corp shareholders are marked as such in their “Personal information” section in Justworks.
A note about COVID-19: If your employees received Families First Coronavirus Response Act (FFCRA) payments, their qualified FFCRA wages will show up in Box 14 of their Form W-2.
2. CONFIRM CONTRACTOR AND VENDOR FILING STATUSES
You have the option for Justworks to file your contractors and vendors’ Forms 1099 on your behalf. In order for us to do so, you’ll need to ensure all contractors and vendors have “Justworks to file” selected in their settings.
You can use the 1099 Preview report to generate a downloadable report of the contractors and vendors that Justworks will be filing for. If you need to make changes, you can do this on the contractor’s or vendor’s profile settings in Justworks. If you don’t want us to file Forms 1099 for some or all of your contractors and vendors, make sure they have ‘No’ marked in their contractor or vendor settings.
3. CHECK FOR PAYMENTS MADE OUTSIDE OF JUSTWORKS
If you made taxable payments (e.g., by check) outside of Justworks to employees while you have been on Justworks, you must report those to Justworks.
A few notes on payments made to contractors and vendors outside of Justworks:
- Contractors — Justworks doesn’t require contractor payments to be processed through Justworks. However, if you would like us to provide a Form 1099 to your contractors, you need to inform us of all payments made to your contractors outside of Justworks during your time using our services in 2020. In a contractor's settings, there’s a ‘Fees, commissions, and other nonemployee compensation paid externally in 2020’ field and ‘Gross proceeds paid to an attorney externally in 2020’ field that you can populate with contractor payments made outside of Justworks. Depending on the type of payment that is reported, they will be issued a 1099-NEC or 1099-MISC. More information on that here.
- Vendors — Like contractors, if you would like Justworks to provide a Form 1099 to your vendors, make sure all vendor payments are recorded in Justworks. If you have made payments outside of Justworks during your time on Justworks, you can add previously-made payments by navigating to the vendor’s ‘Company details’ page and scrolling down to the settings section. In this section, you’ll let us know whether or not you want us to file a Form 1099 and can record ‘Fees, commissions, or non-employee compensation paid externally in 2020’, ‘Real estate or machine rentals paid externally in 2020’, and ‘Royalties paid externally in 2020’.
4. REMIND YOUR EMPLOYEES ABOUT THE OPPORTUNITY TO MAX OUT 401(K) CONTRIBUTIONS
If your employees are enrolled in a 401(k) plan either through Slavic or an external provider, they may wish to contribute the maximum amount for 2020: $19,500, or $26,000 for those 50 and over.
Let your employees know that, to change or max out their 401(k) contributions, they’ll need to do so at least 2 business days before your company’s payments process in order to be effective on the last payroll of the year.
Remind your employees to change back their contributions before your first payroll of the new year! This does not automatically reset in the new year.
Similarly, for bonus payments, tell your employees to update their 401(k) contributions before your company’s payments process. They can do it right in Justworks by going to Retirement planning.
Payments need to be deposited in 2020 to be reflected on W-2s and 1099s for 2020. Remember, bank holidays can impact payment processing times, and December 31 is the last business day of 2020. To that end, ensure you have scheduled all 2020 payments, including bonuses, commissions, contractor and vendor payments, etc. by 2pm ET on December 24, 2020.
5. REPORT TAXABLE FRINGE BENEFITS YOUR COMPANY HAS OUTSIDE OF JUSTWORKS
When recording fringe benefits prior to the end of year, remember that taxes are deducted from your employee’s upcoming paycheck for every fringe benefit you record through the Payments Center. If you are recording a large fringe benefit amount, consider the employee’s typical paycheck amount to avoid a payroll error or a low net payment to the employee.
For more information, check out “Employee Fringe Benefits - What Are They, Exactly?”.
6. TALK TO YOUR TAX ADVISOR ABOUT EQUITY BASED COMPENSATION
When scheduling equity based compensation in Justworks, always talk to your tax advisor about the following beforehand:
- The employee’s name
- The type of equity or income they received
- The taxable amount of that income (assuming a taxable event occurred)
- The date the taxes should process
- If a Form W-2 box code is required
Once the information above is confirmed, record the taxable fringe benefit in the Payments Center.
7. REVIEW YOUR FINAL PAYROLL OF THE YEAR
Always review your final payroll of the year. Remember that barring certain extenuating circumstances, Justworks is unable to make any adjustments or corrections after your final payroll runs.
8. SIT BACK AND RELAX
Once you check off those little tasks, we can take care of the big tasks. Justworks will file the following forms on your behalf: Forms W-2, Forms 1099-MISC and 1099-NEC, Forms W-3, Forms 940, Forms 941, Forms 1096, Forms 1095-C and Forms 1094-C (if applicable). Justworks will also issue the following forms on your behalf to your employees, contractors, and vendors, as applicable: Forms W-2 and Forms 1099-NEC and 1099-MISC, and Forms 1095-C (where applicable). Getting a head start on these items will make your end-of-year experience go more smoothly.
Please be mindful of phishing schemes that are more common at this time of year. As your PEO, we’ll be collecting a lot of information from you for the purpose of payroll and tax filing.
There are a few things you can do to protect your and your employees' information:
- Set a strong, unique password for your account (that you don't use for anything else) and don’t share your password with others. Hint: Justworks will never ask for this information from you.
- Enable 2-factor authentication, and encourage your employees to do the same.
- Be mindful of phishing schemes that are more common at this time of year. You can hover over hyperlinks in emails to check that the URL is related to the company that appears to be writing you.
- Be careful about what you share via email. Hint: Justworks will never ask you to send Social Security Numbers or other sensitive information over email.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.