As the end of the year approaches, it’s the perfect time to review your payroll setup and ensure everything is in order before tax season. Proper year-end payroll planning can help you avoid costly mistakes and maximize tax savings. Here are three essential tips to keep in mind:
1. Review Employee Classification
Misclassifying workers as independent contractors instead of employees can lead to significant penalties from the IRS. Take time to review how your workers are classified and ensure you’re complying with labor laws. Correcting any issues before the year ends will save you headaches later.
2. Report Shareholder Health Insurance
If you’re an S Corp owner, don’t miss this important step! According to Kim at Ancient City Accounting, “The IRS requires health insurance premiums for S Corp shareholders and their dependents to be reported as part of payroll, under ‘Shareholder Health Insurance.’” This ensures the amount can be deducted on your personal tax return. Be sure to notify your payroll provider of the annual total before your last payroll run.
3. Double-Check Tax Deposits and Deadlines
Verify that all payroll tax deposits have been made and are properly recorded for the year. Missing deadlines or underpaying taxes could result in fines or penalties. The IRS often updates thresholds and requirements, so it’s a good idea to check for any changes that could impact your payroll.
Year-end payroll adjustments don’t have to be overwhelming. A little preparation now will ensure a smoother tax season and might even save you money. If you have questions about Shareholder Health Insurance reporting or other payroll concerns, check out Kim’s advice on the Ancient City Accounting blog.