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How to Handle Year-End Payroll and W-2 Preparation
How to Handle Year-End Payroll and W-2 Preparation is one of the most common payroll questions from business owners who want to get it right. This guide covers the steps clearly.
What You Need Before You Start
- Employer Identification Number (EIN) from the IRS
- State employer withholding account in each state where you have employees
- Employee W-4 (or equivalent state form)
- Employee banking information for direct deposit
- Pay schedule established (weekly, bi-weekly, or semi-monthly)
Step-by-Step Process
The steps below apply to the scenario in this guide. Each step requires accuracy -- errors made in setup compound across every subsequent pay cycle.
- Step 1: Verify employee information. Confirm legal name, address, and SSN match IRS records. Name/SSN mismatches on W-2s trigger IRS correspondence.
- Step 2: Apply the correct pay and withholding rates. Use the current year's IRS Publication 15 tax tables. State withholding uses the state equivalent.
- Step 3: Calculate gross pay. Include all compensation types: base pay, overtime, commissions, and any taxable benefits.
- Step 4: Deduct in the correct order. Pre-tax deductions (401k, HSA, FSA) first, then taxes, then post-tax deductions (Roth, garnishments).
- Step 5: Remit taxes on the IRS schedule. Deposit by the EFTPS deadline (semi-weekly or monthly based on your lookback period). Late deposits trigger the failure-to-deposit penalty.
- Step 6: File quarterly and annual returns. Form 941 is due by the last day of the month following each quarter. Form 940 is due January 31 of the following year.
The Faster Path for Most Small Businesses
Most businesses under 100 employees find that managed payroll handles all of the above more reliably than doing it internally. BEG manages payroll at $25-$45 PEPM, all-inclusive. Setup takes 3-5 business days.
Managed Payroll, Handled.
BEG manages payroll at $25-$45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
What does managed payroll cost?
BEG managed payroll runs at $25-$45 per employee per month, all-inclusive. For a 25-employee company, that is $625-$1,125 per month.
How quickly can you set up managed payroll?
Setup takes 3-5 business days from contract signing to first live payroll run. We handle the configuration, data migration, and tax account setup.
What is included at $25-$45 PEPM?
Payroll processing, federal and state tax deposits and filings, new hire reporting, direct deposit, year-end W-2s and 1099s, compliance monitoring, and off-cycle runs. All included.
Can you handle payroll in multiple states?
Yes. Multi-state payroll is a standard service. We register in each state where you have employees and handle state withholding and unemployment filing in all applicable states.
What happens if there is a payroll error?
If an error occurs due to our processing, we correct it at our cost. This includes amended returns, corrected W-2s, and penalty abatement where applicable.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries. BEG manages payroll at $25-$45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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