Year-end payroll doesn't have to be stressful. With proper planning and a clear checklist, you can navigate the process smoothly and avoid costly penalties. Here's your complete guide to year-end payroll tasks in California.
Key Year-End Deadlines
- January 31:W-2 and 1099 deadline to employees and contractors
- January 31:Federal Form 940 due (unless extension)
- February 28:Paper 1099 forms due to IRS (electronic filing deadline: March 31)
- December 31:Last day to correct W-2 errors for prior year
Your Complete Year-End Checklist
☐ Before December 31
- Verify all employee addresses and Social Security numbers are correct
- Process final paychecks for employees who left during the year
- Review payroll records for accuracy—check for missing punches, incorrect pay rates
- Ensure garnishments and deductions are current and properly coded
- Confirm benefits deductions align with plan year requirements
- Reconcile quarter 4 payroll totals
- Back up all payroll data securely
☐ W-2 Preparation
- Review Box 1 (Wages), Box 3 (Social Security wages), Box 5 (Medicare wages) for accuracy
- Verify state wages are reported correctly for California
- Check that tips reported (Box 7) match actual tip records
- Confirm deferred compensation plans are properly coded
- Review health insurance coverage dates and affordability determinations
- Verify third-party sick pay is properly reported
☐ 1099-NEC Preparation (Nonemployee Compensation)
You must file Form 1099-NEC for anyone who:
- Was paid $600 or more for services as an independent contractor
- Is not incorporated (corporate officers are generally employees, not contractors)
- Is a freelancer, consultant, or self-employed individual
☐ California-Specific Requirements
- File DE 9/DE 9C for the 4th quarter and annual totals
- Verify SDI (State Disability Insurance) withholdings are correct
- Report new hires to EDD within 20 days
- File Annual Reconciliation (DE 88A) if required
- Issue California 941 equivalents (DE 9/DE 9C)
☐ Federal Filing Requirements
- Form 940 (Employer Annual Federal Unemployment Tax Return)
- Form 941 (Employer's Quarterly Federal Tax Return) for Q4
- Form 945 (Annual Withholding Tax Return) for backup withholding
- Form W-2 (Wage and Tax Statement) for each employee
- Form W-3 (Transmittal of Wage Statements) with paper filing
- Form 1099-NEC/1099-MISC for contractors
Don't Wait Until January!
Starting your year-end preparation early is crucial. The IRS charges penalties for late filings ranging from $60 to $310 per form, and California EDD penalties can be even steeper. Give yourself plenty of time to review and correct any issues.
Common Year-End Mistakes to Avoid
- Incorrect Social Security numbers (verify with employees!)
- Forgetting to include bonus or commission payments
- Missing taxable fringe benefits (company cars, personal use of company cards)
- Incorrect retirement contribution coding
- Failing to reconcile payroll tax deposits with filings
- Overlooking state-specific filing requirements
Let Us Handle Your Year-End Payroll
Year-end payroll can be overwhelming, especially in California with its complex requirements. Glendale Payroll handles all the details—W-2 preparation, tax filings, and compliance—so you can focus on your business.
Schedule Year-End Consultation