The Year-End Payroll Checklist Every Employer Needs
Everything to confirm before your last payroll of the year, in the order it actually needs to happen.
The last payroll of the year isn’t just another pay run. It’s the one where every small error from the past twelve months shows up at once, in a W-2 an employee is going to look at closely. This checklist walks through what to check and when, so nothing gets caught in the last week of December.
Print it, save it, or download the full PDF version below to work through with your team.
Who owns what
Payroll
Employee data accuracy, tax elections, the pre-close audit, and the final pay run itself. The team most exposed if a W-2c has to be filed.
HR
Benefits deduction reconciliation, open enrollment overlap, and the employee-facing communication around W-2 and 1099 timing.
Finance / Accounting
Bonus approval and funding, GL reconciliation against payroll totals, and sign-off on any mid-year entity changes reflected in year-end filings.
Assign a named owner for each phase below before October. Most year-end scrambles aren’t caused by a missing step, they’re caused by a step nobody was clearly on the hook for.
8–10 weeks out (October)
4–6 weeks out (November)
2–3 weeks out (early-to-mid December)
Last payroll of the year
January
The mistakes that cause the most year-end rework
Treating bonuses like regular wages instead of supplemental wages. Regular W-4 withholding assumes a steady paycheck; running a bonus through the same calculation usually under-withholds and hands the employee a surprise bill in April. Supplemental wages get their own flat-rate treatment (see the FAQ below).
Waiting until the last payroll to reconcile benefit deductions. A mismatch caught in October is a five-minute fix. The same mismatch discovered during the final pre-close audit means retroactively adjusting deductions across multiple pay periods, under a deadline.
Assuming a terminated employee’s address on file is still current. Returned W-2s are disproportionately common for employees who’ve already left, since they have no reason to update HR on a new address after their last paycheck.
Missing a state’s earlier internal W-2 correction deadline. Not every state runs on the same clock as the IRS. A correction filed on time federally can still be late by a state’s own standard.
Skipping a documented off-cycle correction cutoff. Without one, last-minute changes get made ad hoc by whoever’s available, which is exactly how a small error turns into a W-2c.
Improvement in payroll accuracy
Cuts audit time across multiple locations
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Common questions
When should I start my year-end payroll checklist?
Start reconciling data in October. Waiting until December means fixing problems under deadline pressure instead of ahead of it.
What’s the biggest year-end payroll mistake employers make?
Not verifying employee data (names, SSNs, addresses) early enough. A wrong SSN or name on a W-2 means a correction filing (W-2c) that’s slower and more visible than catching it beforehand.
Do I need to do anything different for year-end if I have employees in multiple states?
Yes. See the Multi-State Year-End Compliance page for what changes by state at year-end and January 1.
How are year-end bonuses and supplemental wages taxed?
Federal withholding on supplemental wages like bonuses, commissions, and back pay is generally a flat 22%, or 37% on the portion of an employee’s cumulative supplemental wages that exceeds $1 million in a calendar year. States set their own supplemental rates separately, so check each state you operate in before running a bonus payroll.
What if we find an error after W-2s have already been filed?
File a corrected W-2c with the Social Security Administration and send the corrected copy to the employee as soon as the error is found. Corrections found in February are a quick fix; the same error surfacing during the employee’s own tax filing in April is a much bigger problem.
Who should own each part of the year-end payroll checklist?
Payroll typically owns data accuracy and the final pay run, HR owns benefits reconciliation and employee communications, and finance or accounting owns GL reconciliation and bonus approval. Assign an owner to each phase before October so nothing falls through the cracks between teams.
Get the full checklist as a printable PDF
Download the complete year-end payroll checklist to work through with your team.
Download the Checklist