September 28, 2021Year-End Payroll Planning
Prepare for Another Different Year-End Experience
If you are a payroll veteran, you likely already know what you are facing based on last year’s atypical year-end. If you are new to payroll, you might not be aware that things are usually more predictable. Either way, the pandemic continues to leave its mark on the legions of payroll professionals who really just don’t need these kinds of complications. Frustrating though it may be, Luke Bollinger, CPP and Payroll Consultant with Wise, says caution is in order. “Yes, year-end is more complicated again this year, but the complications are different. Getting into the pandemic was hard and getting out is going to be hard. Just because you handled last year well doesn’t automatically mean ‘you’ve got this’.”
Planning Required: Think Ahead to Achieve Year-End Success
In 2020, year-end was a challenge due to the waves of COVID-relief legislation and concerns over compliance. In 2021, the same concerns apply as well as an additional factor: “If you look at what is going on in the marketplace, there are people leaving the payroll field,” explains Luke. “That is one reason why we are doing so much emergency payroll processing for clients now. It is because it’s hard to find people to fill the roles and companies are left in the lurch because experienced workers are moving on. If you have a new person in that role now, they will be facing their first year-end – they will need expert help to avoid making major mistakes. We share knowledge with clients as we help them get the job done right using best practices, in essence providing training on timing and activities required for a successful year-end. This year, as in 2020, we are already seeing high demand for year-end assistance.”
Remote Worker Issues Impact Year-End
Luke says it is worth noting that because many regions are no longer in a state of emergency, it isn’t clear which employees have returned to onsite work and which have remained remote or worse, which have moved out of state due to the flexibility remote working suddenly provided. This means there will be a much higher occurrence of nexus/remote worker tax issues that will need to be evaluated. “As the emergency legislation starts to expire, you need to look at workers who were crossing state lines to work remotely from neighboring states such as New York/New Jersey and Connecticut/New York, etc. It has really changed the game because if there’s no reciprocity between those states there could be different reporting requirements and you will need to make sure your employees are being taxed correctly. And it’s not just employee withholding, but unemployment and potentially other local factors that may exist now that did not previously. Certainly, if you know you won’t have time to evaluate, now is the time to line up help.”
COVID Credits are Still a Factor
Luke also points out that there was continued activity this year around family and sick leave credits, employer retention credits and the development of the COBRA premium credits. “We had the continuation of last year’s COVID credits and relief packages, as well as the new package, which was effective from second to third quarter 2021, and everything else that will end at 12/31/21.”
Some things you can do now to help set you up for a successful year-end are:
- Balance your quarters as soon as they end
- Review your Form 941 for accuracy
- Keep a pulse on state rules around remote work as they are communicated because they are constantly changing
“Then, start doing your review in November,” says Luke. “Do your additional year-end close at the very end of December after your last payroll run. Depending on your vendor, your W-2’s will need to be approved early in January. If you do them in-house, you control that timing. Some of the changes this past year happened as late as March, so you may expect to do another pass even after you think your year is closed. Expect that you might have employees wanting to use their W-2 forms to get their refunds while you are still trying to react to changes.” It is also important to note that 2021 W-2 reporting will change, with box 14 now possibly having 6 new entries.
Make Sure to use the Revised Form 941 and 941X
“The 941 has changed 3 times this year alone,” marvels Luke. “We used last year’s for quarter one, they released a revised form for quarter two. Normally the IRS goes years without revising the form. The last time it happened before the pandemic was five years ago. Each form has a revision number at the bottom, and they have made it very clear that it will not be okay to use a prior version for reporting.”
Stay Calm and Reconcile for Accuracy
Luke offers a professional tip around reconciliation: in the interest of accuracy, do your own quarterly reconciliations so that you know what they should look like when you review your returns from the software vendors. “At Wise, for our clients, we have been staying on top of quarterly reconciliation with the use of our custom 941 tracking assistant we built and are keeping updated as rules and regulations change. We needed to make sure we knew what client numbers should be so we can catch vendor errors, and this worked because even when vendors got it wrong, we knew. Having the professional experience and the 941 tracker, if people walk in as new clients in November having done no reconciliations or balancing, we can still take a look and run numbers to help them. We helped several clients last year where we re-ran their numbers as late as March 2021, and we discovered they were entitled to credits. They were able to re-file and receive the money they were entitled to. New clients can throw it all at us and we can make sure we know what is accurate and tell them how much they are due back. We did it last year, and we will do it again this year. So, my message to payroll people out there is, if you haven’t stayed on top of it, don’t panic. We can help.”
Line Up Year-End Help Now
Luke is candid in detailing his expectation that the Wise Payroll team will be extremely busy helping clients with year-end again in 2021. He says that lining up needed assistance from any source early is a good idea because of the anticipated demand for services. Wise has a full team of FPC and CPP certified payroll professionals who support clients in all payroll tasks, including Year-End, Tax, Flexible Managed Payroll and Temporary Payroll Support. Reach out to our expert consultants at Wise with questions or to find out more about services we provide: 800-654-4550 or HCMHelp@WiseConsulting.com.
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