The end of the year is always one of the busiest times for business leaders. It’s why many owners push tax planning and compliance reporting into the new year. But waiting until January to start preparing is risky. Limited resources and time constraints can lead to errors, such as misclassified expenses, incorrect employee information, or missed tax deadlines. These mistakes can result in penalties, surprise tax bills, or even cash flow challenges.
But year-end reporting doesn’t have to be stressful. With the right planning and the right partner, you can close the books with confidence and start the new year on a solid footing. Below is a checklist of key year-end responsibilities every HR and payroll team should review.
Critical Tax and Payroll Items to Address
Year-end reporting requires meticulous attention to every employee, contractor, and federal mandate. Ensuring every form is accurate and filed on time is non-negotiable.
- Wage Reporting for W-2 Processing: You must verify all employee wages, withholdings, and benefits data. This ensures accurate preparation and distribution of W-2 forms by the IRS deadline, typically January 31.
- Filing 1099 Forms for Independent Contractors: Always be sure to pay your independent contractors in full by the end of the year. Verify that you have a current W-9 form on file for each contractor. This ensures you can file the necessary 1099 forms by the January deadline.
- ACA Reporting (Forms 1095-C): Compliance reporting for the Affordable Care Act (ACA) requires preparing and filing Form 1095-C. This form details the health coverage offered to employees, and its complexity demands early attention.
- Federal Unemployment Tax (Form 940): You must file Form 940 annually to report your federal unemployment tax liability. This tax is critical for supporting the federal and state unemployment programs.
- Quarterly Wage Reporting (Form 941): Ensure all four quarterly Form 941 reports—which document employee wages, tips, and withheld taxes—have been reconciled and filed accurately for the entire year.
- Tax Withholdings, Social Security, and Medicare: Confirm all income tax, Social Security, and Medicare taxes were withheld and deposited correctly throughout the year. Any discrepancies can lead to major penalties and complications.
Year-End Housekeeping: Steps to Ensure Accurate Tax and Payroll Reporting
Beyond tax forms, year-end is the ideal time for an HR audit to ensure your records and policies are clean for the new year.
- Verify Tax Deadlines: Depending on your business structure (sole proprietorship, corporation, or non-profit), tax dates will vary. Verify your deadlines now, and secure tax payments separately to cover both state and federal liabilities.
- Review All Employee Records: Verify that your payroll contains only current, active employees and that all contact and tax information is correct. Ensure that previous employees can no longer access company systems.
- Review FLSA Status: Be sure to review your Fair Labor Standards Act (FLSA) status for all employees. You must confirm that you are still meeting any new FLSA salary thresholds for exempt employees to avoid legal risks.
- Review Clients and Vendors: Review all client and vendor contact information. This step is crucial for accurate 1099 processing and ensuring clean records for accounts payable and receivable.
- Evaluate PTO and Leave Policies: Decide how unused Paid Time Off (PTO) will be handled and ensure employees are clear on year-end policies and accruals. This prevents internal disputes and ensures compliance with state-specific PTO laws.
- Generate Financial Reports: Generate a profit and loss report and a balance sheet. This helps you identify what your business did well and what could be improved for next year. Additionally, generate cash flow reports to understand your readily available cash.
- Estimate Taxes: If you pay tax payments quarterly, be sure to track what you’ve already paid. This will help you determine what you’ll need to pay at year’s end. Remember to include taxes for bonuses given to employees, as these are subject to regular payroll taxes.
Need Help Eliminating the Guesswork?
For many small to mid-sized businesses, year-end reporting is a heavy lift. Keeping up with ACA reporting, filing deadlines, and payroll accuracy—while still running day-to-day operations—can be overwhelming. That’s where a PEO partner like LBMC EP comes in.
With LBMC EP, you get more than just payroll support. We simplify year-end reporting by:
- Handling tax withholdings, W-2s, 1099s, and compliance notices with accuracy and efficiency.
- Providing access to better employee benefits through pooled resources, reducing administrative time during open enrollment.
- Offering dedicated teams who know your business and proactively help you stay on top of requirements.
- Consolidating HR, benefits, payroll, and compliance into one integrated solution so nothing slips through the cracks.
Beyond reporting, our PEO services help you benchmark benefits, audit HR processes, and prepare strategically for the year ahead. Instead of scrambling each December, you’ll have a clear plan and a trusted partner to carry the weight.
Close the Year with Confidence
Year-end reporting doesn’t have to be so stressful. With the right checklist, a proactive approach, and support from a partner like LBMC Employment Partners, you can minimize stress, reduce risk, and focus on planning for growth in 2026.
If you’d like to learn more about how LBMC EP can simplify year-end reporting and support your HR needs, download our free year-end HR checklist or contact our team today. We’re here to help you finish strong and start the new year with confidence.
