An illustration of a woman holding a W2 form and a clock pointing to the word “Tax”

Countdown to year-end: Are you on track to finish this tax year without stress?

Thursday, December 01, 2022

Children gleefully track the days until Christmas with chocolate advent calendars. Many adults in glittering attire eagerly await the Times Square Ball countdown on New Year’s Eve.

If you’re a business owner or payroll professional, there’s likely a different, slightly less glamorous kind of countdown taking place in your mind: year-end.

As you think about the tax year coming to a close, some of the important considerations on your mind at the end of the year might be:

  • Tax returns and year-end bookkeeping tasks

  • W-2 preparation

  • Applicable ACA reporting

  • Missing tax identification numbers

  • Missing employee information

  • Fringe benefits

  • Shorter processing periods

  • Alternative package delivery methods

It’s a long list. And there’s reason to be preoccupied with getting it all done and double checked.

Employers must file W-2 forms with the Social Security Administration (SSA) by January 31. Businesses — including sole proprietorships, LLCs and C corporations — also are obligated to file any 1099 and 1095 forms with the Internal Revenue Service (IRS). If you do end up filing W-2s with missing or incorrect Social Security numbers or employee names, the IRS penalties can really add up (even for small business owners) — potentially decreasing cash flow and profits.

IRS Penalties

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The penalty is $50 per Form W-2 if correctly filed within 30 days of the due date, with a maximum penalty of $206,000 for small businesses.

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The penalty is $110 per Form W-2 if correctly filed more than 30 days after the due date but by August 1, with a maximum penalty of $558,500 for small businesses.

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The penalty is $290 per Form W-2 if the required forms are not filed or are correctly filed after August 1, with a maximum penalty of $1,177,500 for small businesses.

But wait! Before you get too worried about what could go wrong, take a deep breath. As long as you have a plan in place and the appropriate resources to follow through with it, you can have an error-free year-end.

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A smooth year-end experience

Businesses aren’t the only ones taking action as December 31 draws near. Taxpayers likewise are busy with year-end tax planning — checking on the amount of income tax paid throughout the year and maxing out retirement account contributions to IRAs or similar retirement plans to help maximize their tax deductions.

While you’ll need to keep up with this potential influx of changes from employees, above all, the top priority on your list to avoid potential W-2 filing errors has to be auditing your employee data. Confirm the following information is complete and accurate for each employee:

  • First and last name

  • Social Security number

  • Address, city, state and ZIP code

If you’re still feeling concerned about the many other important tasks that need to be completed as part of the year-end process, outsourcing your payroll could be a viable option. With a trusted partner, you’ll receive action items, vital reminders and assistance from HR professionals far in advance to ensure your year-end is processed in a seamless and timely manner.

Then, once your year-end is wrapped up, a reputable tax professional or CPA can assist your business in myriad ways during tax season — from finding additional tax credits and other tax savings to providing tax planning strategies that can reduce your taxable income and tax liability.

But there’s even more good news when it comes to hiring a payroll provider — benefits that last all year long.

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Additional upsides to outsourcing payroll

On top of calculating federal taxes and performing the multitude of other tasks associated with payroll processing, using a full-featured solution like Payroll+ can help set you up for success. The suite’s hire-to-retire people management tools help keep businesses compliant with payroll solution – from E-Verify to labor laws – while providing a single source for all your HR needs.

This custom-built solution can also increase employee satisfaction and retention by streamlining personnel management workflows and processes, such as recruiting top-tier talent.

To learn more about how Heartland can help with year-end tasks and all your payroll and human capital management needs, contact us.

Disclaimer: The information provided in this document does not, and is not intended to constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. Information provided may not constitute the most up-to-date legal or other information, and readers of this information should contact their attorney to obtain advice with respect to any particular legal matter, in the relevant jurisdiction. All liability with respect to actions taken or not taken based on the contents here are hereby expressly disclaimed.

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