Payroll end of year

Make sure your final payroll and tax filings are up to date for the end of the financial year.

On December 7, the IRS announced they anticipate a late release of the 2018 withholding tables due to the potential enactment of the Tax Cuts and Jobs Act. IRS advised that employers should continue to use 2017 information until 2018 versions are issued.

Xero is closely monitoring IRS updates and will continue to calculate your Federal Income Tax using 2017 withholding tables. Once the IRS release 2018 rates, Xero will apply them and communicate with you as appropriate. Xero will not implement rates or forms based on IRS draft revisions if these release early.

  1. Process all pay runs for the year.
  2. Preview your W-2 tax forms to make sure the information is correct.
  3. Distribute copies of W-2 forms to your employees. Xero doesn’t send W-2 forms to employees directly.
  4. Check employee Social Security Numbers before filing your year end returns. These are available in the Employer copy W-2 forms.
  5. Calculate the Federal Unemployment Tax (FUTA) for your business if your state is eligible.
    • Download your federal 940 form. Xero will prompt you to recalculate FUTA if applicable.
    • Xero then processes an unscheduled pay run, if needed, and provides details of any additional FUTA obligations that you will need to pay.
  6. File the federal and state tax filings for your business's payroll, such as federal 940 and 941, before the required due date.

    When you print out or create a PDF of your W-2 form, Xero also includes your W-3 in the last page of the PDF.

  7. Collect new W-4 forms for the new tax year and update them before the first pay run in the new year.

Payroll end of year checklist

StatusActivity/ taskReport
Review payroll tax settings
 Check the tax filing location listed on tax forms.Payroll Settings > Work Locations > Filing Location
Review employee settings
 Ensure that contact information for all employees is up to date, including phone numbers and mailing addresses.Reports > All Reports > Payroll > Employee Contact Details Report
 Check for invalid social security numbers.Reports > Taxes & Filings > state quarterly unemployment forms
Pre-reconciliation
 Compare total wages reported for each tax (Individual or All) 
 
  • Ensure that other special tax items have been entered. These may include: other compensation, employee business expense reimbursements, taxable fringe benefits, dependent care benefits.
Reports > All Reports > Payroll Activity Summary
 
  • Verify that withholdings have been made accordingly or withhold from the final paycheck for taxable fringe benefits. These may include: Group-term life insurance in excess of $50,000, S-Corp health insurance for 2% shareholders, company provided transportation or parking benefit.
Reports > All Reports > Payroll Activity Summary
Reconciling payroll total to General Ledger accounts
 Schedule special payrolls needed (e.g. seasonal or annual bonuses).Unscheduled pay run
 Ensure there are no outstanding issues that need to be resolved by December 31. 
 Determine where wages fall if your pay period is in December 2017 and your payment date is in January 2018.W-2's are based on when the employee received the wages, and not the pay period in which they were earned. For example, paid wages are reported on the 2018 W-2 for pay period December 17 - 28, 2017 and pay date January 3, 2017. You’d need to create a manual journal for this.
 

Next day tax deposits

Payroll liabilities that reaches 100K in one liability period have to be made the next business day.

Payroll > Taxes & Filings > Current, view amount due under tax agency
 Identify and make corrections for any discrepancies found
Employee payment summary - run the payment summary for individual employees.
Reports > All Reports > Payroll Activity Summary
  Ask current employees to update their Form W-4 if required.Form W-4 (IRS website)