The Essential Year-End Payroll Checklist (December 2025 TogetHR Times)
There is so much to think about when Q4 arrives and the end of the year looms larger on the horizon with each passing day. Businesses shift their focus toward wrapping up projects and planning for Q1, and essential payroll and HR tasks can creep up quickly, making year-end deadlines feel tight. On top of that holiday schedules compress processing windows, and January reporting requirements don’t leave much room for error.
The good news is that a little preparation now can save a lot of stress later and help your team, your books, and your compliance requirements stay aligned heading into 2026.
Below are the key payroll items to tackle before December 31.
Verify Employee Information - This is key as incorrect names, addresses, or Social Security numbers can lead to W-2 delays and IRS notices. This is the time to confirm employee personal details, especially if you’ve experienced turnover or have remote staff who may have moved during the year.
Review Year-to-Date Wages and Deductions - Before the final payroll runs, audit year-to-date wages, deductions, employer contributions, and annual limits for items like 401k, HSA, and FSA. Catching discrepancies now helps prevent corrections and reprints in January.
Reconcile Benefits and Fringe Items - Some benefits must be added to payroll before year-end, including S-Corp owner health insurance, group-term life over $50,000, personal use of company vehicles, and employer HSA contributions. These affect taxable wages and must be included before W-2s are finalized.
Prepare for Bonuses and Holiday Pay - Q4 is bonus season, and timing matters. Decide early whether bonus checks will be issued separately, combined with regular pay, grossed up, or paid before or after the New Year. Holiday payroll deadlines also shift because banks close, so planning ahead ensures employees receive pay on time.
Audit PTO, Sick Leave, and Accrual Balances - Whether your policy resets balances, rolls them over, or provides payouts at year-end, employees need accurate information before December 31. This is also a good opportunity to confirm compliance with state and local paid leave laws.
Clean Up Contractor Records for 1099s - If you work with independent contractors, confirm legal names, SSNs or EINs, accurate addresses, and total payments made. Make sure you know how each contractor was paid, whether through payroll, accounts payable, or a combination. Clean data now makes January 1099 processing much smoother.
Double-Check SUTA, SUI, and Workers’ Comp Classifications - Year-end is the best moment to review employee classifications, wage reporting, and any pending notices or rate changes. State unemployment and workers’ comp rates often shift in January, and reviewing classifications now helps prevent costly adjustments later.
Confirm W-2 and 1099 Deadlines - The IRS deadline for issuing W-2s and 1099s to both workers and the IRS is January 31. With the quick turnaround after the New Year, being prepared before the final payroll is essential.
Speak With Your CPA or Accountant About Year-End Tax Planning - Year-end is also the ideal time to consult your CPA or accountant about tax planning strategies. They can help determine whether certain purchases, charitable donations, or expense timing decisions could benefit your 2025 tax position. Taking care of these items before December 31 ensures you maximize available opportunities.
More good news - you don’t have to do Year-End alone! This is one of the most demanding times for businesses, but you don’t have to navigate it alone. Our consultants can assist with payroll audits, system cleanup, bonus and holiday payroll planning, PTO policy review, record verification, compliance preparation, and W-2/1099 readiness.
We work alongside your business to keep everything organized, compliant, and prepared for a smooth start to 2026.
If you’d like help getting your year-end checklist started or want us to handle the heavy lifting, our team is here to support you.
By Sunny Jonckheere
