Year End Planning – W2’s and 1099’s

As the end of the year approaches, it is time to make sure your company’s documents are up to date and accurate. It is best to start preparing in the beginning to middle of November to avoid the rush during year-end when people are out of the office on vacation. Two areas that I am going to discuss today are preparing for W-2 and 1099 distribution.

W-2 Year End Planning

Generally, your payroll provider will prepare and mail your W-2s directly to your employees sometime in January. In order for the payroll provider to send out the forms correctly, make sure that the information the payroll provider has for each current and terminated employee is up to date and accurate. If employees are getting direct deposit, they might not think of notifying accounting or HR of a change of address right away. I would recommend reaching out to your employees in November and asking them to check their next paystub to verify the address on file is correct. If not, they need to send any changes to accounting by a specific due date for processing. The employee should do this by filling out a new W-4 with the correct address or your companies change of address form.

You should have received contact information for terminated employees during the exit interview. Reach out to those employees just with a simple email to check their current address for W-2 processing. Contacting current and past employees now will ensure that the W-2’s will go in the mail and get to the recipient on time. Taking a few steps to send out a gentle reminder will save you a lot of time and money later when it becomes closer to tax season and one or more employees didn’t receive their W-2 in the mail, requiring you to take extra time getting them reissued and sent.

1099 Year End Planning

In order to prepare a 1099 for the year, you will need a W-9 on file for any person that performed work for you as a subcontractor. If your company uses subcontractors to perform work, you will need to prepare a 1099 by January 31st. It can become a daunting task if things are not organized ahead of time. The first step is to create a list or run a report from your accounting software for all the vendors you paid over $600 to this year. Then, check your paper or electronic vendor files to ensure you have a completed and signed W-9 on file for that vendor. Best practice would be to collect a W-9 from your vendor before payment is released the first time to avoid the work at year end. If you do not have a valid W-9 on file, reach out to that vendor and request a copy to be filled out and returned. Best practice is to contact the vendor by email or fax and provide a copy of the form to make it easy for them to fill out and return. Make a checklist of the vendors missing a W-9 and enter W-9 information into the accounting system as they are received. File a copy of the W-9 in your permanent paper or electronic files as appropriate for your company. Send out a second reminder to vendors 1-2 weeks later, around the first or second week of December. Call the vendor to check on your first request. Hopefully you won’t have to do this a third time, but having a W-9 on file is required so you need to follow these steps. Once again, it is best to collect the W-9 up front to avoid spending extra all this extra time. The longer you wait, the longer it seems to take the vendor to fill it out and return it, especially during the end of the year and Holiday season.

Preparing for year end close and compiling year end reports can be very taxing on your organization. Many companies do not have adequate internal resources to compete these tasks. Contact your CPA or a local accounting firm, like TGG Accounting, to come help perform these year end tasks.

Written by:
Bridgette Cerles
TGG Accounting
 
 
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