5 Things To Do With Your Payroll Before December 31

Year-end is one of the busiest times for business owners and payroll is often the area that needs the most attention. A few quick checks now can prevent January headaches, incorrect W-2s, and unnecessary IRS notices.

Here are the five most important payroll tasks to complete before December 31.

1. Verify Employee Names, Addresses & Social Security Numbers

This is the simplest task and the biggest reason W-2s get rejected.

Take a moment to confirm:

• Employee legal names match their SS cards
• Addresses on paystubs are correct
• Any changes in marital status or withholdings are updated

If your employees use a workforce portal, make sure they have formally consented to receive W-2s electronically. This is legally required.

Correct information now = correct W-2s later.

2. Submit All Final Payroll Requests (Bonuses, 401(k) Withholdings, S-Corp Insurance)

This one is time-sensitive, especially with year-end banking holidays.

If you need to process:

• Bonuses or commission payments
• Additional 401(k) withholdings
• S-Corp owners’ health insurance entries
• Any supplemental wages

These must be processed before your payroll provider’s final direct-deposit deadlines so they count toward 2025 payroll.

If you miss these last processing days, the amounts may fall into 2026 which affects taxes, benefits, retirement contributions, and financial reporting.

Plan ahead so everything lands in the correct year.

3. Record All Taxable Benefits & Reconcile Your Payroll

Make sure no 2025 compensation is missing from payroll before the last run, including:

• Personal use of company vehicles
• Group-term life insurance over $50,000
• Reimbursements that must be taxed
• Bonuses paid outside payroll
• Employer HSA/FSA contributions

Then reconcile payroll to your accounting software (like QBO):

• Gross wages match
• Employer taxes match
• Retirement contributions match
• No duplicate entries exist

This ensures accurate W-2s and a clean set of books going into January.

4. Protect Your Payroll From Fraud (Yes, It Spikes at Year-End)

Unfortunately, hackers know year-end is chaotic and they take advantage of it.

This is a major area that gets overlooked, but it’s one of the most important payroll tasks of the year.

Be on alert for:

• Emails pretending to be employees requesting direct deposit changes
• Fake requests to reroute paychecks
• Spoofed email addresses that look almost identical to your employee’s

Best practice:

• Never update direct deposit information based solely on email
• Require employees to request changes in person or by phone
• Use your secure client portal for upload/verification
• Have a clear internal approval process for payroll changes

One fake email can result in thousands of dollars lost. Protect yourself now.

5. Review Compliance Requirements (Sick Leave, PTO, & Minimum Wage)

Laws change every year, and year-end is the perfect time to make sure your policies and payroll settings are correct.

For example:

• California employees must be allowed to use up to 40 hours or 5 days of paid sick leave per year.
• Accrued vacation/PTO in CA never expires and must be paid out upon separation.
• The CA state minimum wage will increase to $16.90/hour in 2026, and many cities have their own additional requirements.

Even small changes can affect payroll accuracy, overtime rates, and year-end reporting.

Final Thought: A Little Prep Prevents a Lot of Panic

Year-end payroll doesn’t have to be stressful. Verifying information, submitting final payroll items early, staying alert to fraud attempts, and making sure you’re compliant can make January smooth and frustration-free. While you’re wrapping up payroll, it’s a great time to run through your other year-end tasks using our Year-End Checklist.

If you’re looking to get your books and payroll on the right track for the new year, we’d love to walk alongside you. Let’s talk.