Exclusive: Year-End Payroll: Your Guide for Starting 2024 Off Right

Wrap up your calendar year with a bow.

By Amy Glorioso, CPP, Vice President, Client Engagement, Kelly Benefits Payroll

Even though the calendar year is winding down, business owners and payroll specialists can’t take their foot off the gas. A handful of payroll practices demand meticulous attention to ensure 2023 is seamlessly closed, and 2024 starts smoothly. Here’s how you can wrap the calendar year with a bow.

Five Steps To Take for a Successful Year-End 

1. Plan ahead. With bank holidays and paid time off (PTO), there is a high likelihood that processing timelines will be compressed. Be sure to note your payroll partner’s processing guidelines and timelines well in advance to ensure you don’t miss any critical deadlines.
2. Verify employee information. Ask employees to take five minutes to double-check that their reported information, such as Social Security numbers and addresses, is correctly entered into your system. Doing so can help save time, money, and frustration later.
3. Check employer and business information for tax season. Before year-end, verify your employer information, including your company address, state account numbers and Federal Employer Identification Number. These details are crucial to keep accurate, as they will print on all employees’ W-2s as your company’s return address.
4. Strategize W-2 and 1099 distributions. Form W-2s and 1099s must be remitted to employees by January 31, 2024, so that they can file annual tax returns. Before the year ends, make a clear plan of how W-2 distribution will occur. Evaluate whether W-2s will only be available electronically, mailed to employee homes, or both. Once you’ve decided, be sure to communicate this information to employees.
5. Determine bonus payroll processes ahead of time. If your business distributes year-end bonuses, plan how they will be processed for payroll ahead of time. Consider when they’ll be dated, how they’ll be taxed, and plan to have employee communications in place. Employees should know when to expect their bonuses and that they are typically taxed differently than a regular paycheck.

Three Mistakes To Avoid??

Don’t fall victim to the three critical payroll mistakes that we at Kelly Benefits Payroll have seen companies make.

1. Failing to allocate enough time for year-end adjustments and fringes. Make sure you are getting your fringes and year-end adjustments done in time. In general, your organization’s current-year adjustments should be completed either before or with the last payroll processing of the year. You should also allocate ample time to review everything and make necessary changes before the cutoff dates. Finally, check with your accounting department or business’ CPA to inform them of the cutoff dates.
2. Waiting until the last minute to make adjustments or void any checks. If you have any payroll issues, such as incorrect checks that need to be voided or pay adjustments that need to be made, it’s imperative that they’re dealt with in a timely fashion. Failing to do so can be highly problematic, costly and troublesome to fix.
3. Not planning out bonus payroll runs. Too many clients fail to plan their bonus payroll runs ahead of time. You should have a clear plan of how you want your bonus payroll taxes and deductions handled and scheduled well before you intend to pay bonuses.

Four Changes To Watch for in 2024

Keep the following four payroll changes in mind heading into 2024:

1. Social Security wage base increase. The Social Security wage base for 2024 is projected to increase from $160,200 to $168,600. This equates to a maximum employee contribution of $10,453.20, or 6.2% of the wage base. Employers are required to match this amount.
2. Medicare portion of the FICA tax contribution rate. The Medicare portion of the FICA tax has no wage base and requires all taxable earnings to have a 1.45% contribution rate. There is an additional 0.9% employee-only tax on wages in excess of $200,000, and the employer contribution remains at 1.45%.
3. Medical spending account limit increases. Health Savings Account (HSA) limits for 2024 will increase to $4,150 for individual coverage, up from $3,850, and $8,300 for family coverage, up from $7,750. Catch-up contribution limits for participants aged 55 and older will remain at $1,000 for 2024. Deductibles for HSA-eligible plans (i.e., high deductible health plans) must be at least $1,600 for individual coverage and $3,200 for family coverage. The contribution limits for Flexible Spending Accounts (FSAs) will also increase for 2024, up to $3,200 from $3,050 in 2023.
4. Plan contribution limit increases. Like medical spending account contribution limits increasing for 2024, 401(k), 403(b), and 457 contribution limits are expected to increase to $23,000 from $22,500. The catch-up contribution for participants aged 50 and over will remain at $7,500. Simple plan contribution limits are expected to increase to $16,000 from $15,500, and the catch-up contribution remains at $3,500. The annual compensation limit for qualified plans will increase to $345,000, up from $330,000, which is the limit on an employer’s deductible contribution.

There’s Help
Remember, you’re not alone. Organizations like Kelly Benefits Payroll can help you not only navigate the intricacies of payroll and compliance but also help ensure you start your new year off right. CS

Learn more at https://kellybenefits.com/payroll/

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The April/May 2024 issue of Contractor Supply magazine is here!

This digital edition is sponsored by BECK AMERICA Inc.

Our cover story, Masters of Fasteners, visits Interstate Screw Corp. of metro Miami, which serves the fastening needs of south Florida, the Caribbean and Central and South America.  

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