A year-end payroll checklist helps employers close the calendar year with accurate wages, correct tax filings and on-time Forms W-2 and 1099. The work falls into three stages. First, clean up data before your final payroll run. Next, reconcile everything after it, then meet the January filing deadlines. Use this year-end payroll checklist for the 2025 tax year as a practical guide. Then confirm each figure against the IRS Publication 15 (Circular E), Employer’s Tax Guide and your state agencies.
Why a Year-End Payroll Checklist Matters
Most year-end payroll problems start with small data errors: a misspelled name, an old address, a missed taxable benefit or a bonus coded the wrong way. Once Forms W-2 go out, every fix means a corrected form, extra time with employees and possible penalties.
A year-end payroll checklist turns year-end close into a routine. It also gives a small HR or finance team a clear handoff list. That helps when people, an outside accountant or a payroll provider share payroll.
Before Your Final Payroll Run of the Year
Finish these year-end payroll checklist steps before you process the last payroll with a check date in the calendar year. That check date decides which year the wages belong to.
1. Verify employee names, SSNs and addresses
Employers must report each employee’s name and Social Security number on Form W-2 exactly as they appear on the employee’s Social Security card. Publication 15 notes that you may owe a penalty for an incorrect name and SSN unless you have reasonable cause. The SSA’s Social Security Number Verification Service (SSNVS), referenced in Publication 15, lets registered employers check that names and numbers match. Ask employees to confirm their mailing address so forms reach them.
2. Review Forms W-4 and withholding
Make sure every employee’s current Form W-4 is on file and entered correctly. Employees who claimed exemption from withholding need to give you a new Form W-4 each year. Publication 15 sets the deadline for that new form as February 15. After that date, you begin withholding as if the employee had not claimed exemption.
3. Add taxable fringe benefits
Personal use of a company vehicle, certain gift cards, non-accountable expense allowances and similar benefits may be taxable wages. Record them before the final run so withholding and W-2 boxes are correct. IRS Publication 15-B covers how to treat each benefit.
4. Process year-end bonuses correctly
Bonuses are supplemental wages. Publication 15 (2025) allows employers two options for supplemental wages up to $1 million in a year. They can withhold federal income tax at a flat 22%. Alternatively, they can add the bonus to regular wages and withhold on the total. Social Security and Medicare taxes still apply.
5. Check wage bases and Additional Medicare Tax
- Social Security: the 2025 wage base is $176,100 according to Publication 15 (2025). Social Security withholding stops for an employee once their wages reach that amount.
- Medicare: there is no wage base limit. Also, you must withhold Additional Medicare Tax of 0.9% on an employee’s wages above $200,000 in the calendar year.
- FUTA: for 2025 the federal unemployment tax rate is 6.0% on the first $7,000 of each employee’s wages. That rate applies before the credit for state unemployment tax of up to 5.4%.
Tips and Overtime Reporting for the 2025 Tax Year
The One, Big, Beautiful Bill created new reporting for cash tips and qualified overtime compensation. On November 5, 2025, Treasury and the IRS announced penalty relief for the 2025 tax year in IR-2025-110 and Notice 2025-62. Employers will not face penalties for failing to report those amounts separately for 2025. However, that relief applies only if their returns and statements are otherwise complete and correct.
The IRS also said Forms W-2 and 1099 for tax year 2025 will not be updated for these changes. It still encourages employers to give employees a separate accounting of overtime compensation. It encourages the same for cash tips and tipped occupations where they apply. That way, employees can claim the related deductions. If you pay overtime to non-exempt staff, plan how you will produce that statement.
If you are unsure which employees are overtime-eligible, our guide to exempt vs non-exempt employees explains the FLSA basics.
After the Final Payroll: Reconcile Everything
- Compare year-to-date payroll registers with the totals reported on your four quarterly Forms 941 (or your annual Form 944).
- Match federal tax deposits to the liabilities reported for each period.
- Reconcile state income tax withholding and state unemployment wages with your state filings.
- Confirm that you coded pre-tax deductions (retirement, health, HSA, FSA) correctly. That way, W-2 boxes 1, 3 and 5 differ where they should.
- Review employees who left during the year and make sure their final pay and addresses are recorded.
- Run a draft W-2 report and spot-check a sample of employees before filing.
Contractors and Form 1099-NEC
Publication 15 (2025) reminds employers to file Form 1099 for payments of $600 or more to people not treated as employees. That includes independent contractors paid for services performed for your business. Collect any missing Forms W-9 now, while there is still time to chase them.
Year-End Payroll Deadlines: Forms and Due Dates
Publication 15 lists these annual filings for your year-end payroll checklist. When a due date falls on a Saturday, Sunday or legal holiday, it moves to the next business day.
| Form | What it reports | Due |
|---|---|---|
| Form W-2 (to employees) | Wages and taxes withheld for the year | By January 31 |
| Form W-2 Copy A and Form W-3 (to SSA) | Same data, filed with the Social Security Administration | By January 31 |
| Form 1099-NEC | Nonemployee compensation paid to contractors | Furnish and file with the IRS by January 31 |
| Form 941 (fourth quarter) | Quarterly federal income tax withholding and FICA | By January 31 (February 10 if all deposits were made on time) |
| Form 940 | Annual federal unemployment (FUTA) tax | By January 31 (February 10 if all FUTA tax was deposited on time) |
| Form 944 | Annual return for employers the IRS has notified to file it | By January 31 (February 10 if all deposits were made on time) |
Electronic filing requirement
Under final regulations published in the Federal Register on February 23, 2023, filers with 10 or more information returns in a calendar year generally must file them electronically, for returns due on or after January 1, 2024. That count combines return types. As a result, most employers with even a small team plus contractors will e-file Forms W-2 and 1099.
Set Up Payroll for the New Year
- Load new rates. Update the Social Security wage base and state unemployment rates from your state’s annual notice. Also add any local tax changes once your state or locality publishes them.
- Check minimum wage changes. Several states and cities adjust minimum wages on January 1. So confirm rates with each state labor agency where you have employees.
- Confirm your deposit schedule. Your monthly or semiweekly schedule is based on a lookback period from July 1 to June 30. Publication 15 explains that reporting $50,000 or less of taxes in that period makes you a monthly depositor.
- Update benefits deductions. Enter open-enrollment changes and new plan contribution limits.
- Publish the payroll calendar. Account for bank holidays and how they affect pay dates.
- Archive records. Publication 15 says to keep all employment tax records for at least 4 years.
Year-End Payroll Checklist FAQ
What is a year-end payroll statement?
For U.S. employees it usually means Form W-2, the wage and tax statement each employee receives for the calendar year. It shows total taxable wages, federal and state tax withheld, Social Security and Medicare wages and taxes, and certain benefits.
When do Forms W-2 have to be sent to employees?
By January 31 following the end of the tax year. Copy A also goes to the SSA by the same date. If January 31 falls on a weekend, the deadline moves to the next business day.
What should be on a year-end payroll checklist?
At a minimum: verify employee data, review W-4s, add taxable fringe benefits, process bonuses, reconcile payroll to quarterly returns, prepare W-2s and 1099s, file annual returns and set up rates for the new year.
Do I need to send a 1099 to contractors?
For the 2025 tax year, you generally need to file Form 1099-NEC when you pay $600 or more to a non-employee for services in your business. Check the IRS instructions for exceptions, such as most payments to corporations.
This article is general information, not legal or tax advice. Check with a qualified professional for your situation.
Make Year-End Payroll Easier
If your year-end payroll checklist stretches your team thin, Bridgecore Partner’s payroll services can help with processing, tax filings and year-end forms. Contact Bridgecore Partner to talk through your payroll setup before the January deadlines.