As 2020 comes to a close, we want to thank you for choosing LinkHCM for your Human Capital Management needs. In this challenging year, we hope we have provided support and guidance through some of the COVID-19 response legislation and given you peace of mind in managing your team.
Advance planning ensures an excellent finish to the year and successful beginning for 2021. This guide provides valuable information for planning the close of 2020 and the beginning of 2021. Communication with your Client Support Team is crucial in order to ensure accurate year-end reporting.
Please submit your response to the 2020 Year-End Reply Form no later than December 11, 2020. We appreciate your timely attention to these matters.
Section 1: Final Changes to 2020 Payroll Records
Circumstances may require that some employee records be adjusted prior to preparing the W-2's. If you know that you will be submitting information that will affect the W-2's, please indicate that we "HOLD" your W-2's in Box 1 on the Year-End Reply Form. Provide a description of the adjustment and we will advise you of any tax adjustments and assist you in preventing penalties for late adjustments.
When LinkHCM receives additional information in January and the 2020 payroll is affected, it could result in:
- An increase or decrease in employee earnings
- An increase or decrease in payroll tax liability
- Late tax deposits
- Amended returns
All of these could result in penalties, interest AND the need to reprocess your W-2's for an additional reprocessing fee.
Section 2: Year-End Schedule
2020 will close with your last scheduled check date of the year. Please submit the following information no later than your last scheduled payroll processing date.
- Year-End bonus payroll dates *Tax liability greater than $100,000 may require wire transfer of funds.
- Any employee issued checks between the last scheduled check date and Dec 31st (consider voided or manual checks)
- Fringe benefits (see details below)
- Qualified pension plan (see details below)
Section 3: Additional Year-End Information
The value of some non-cash fringe benefits must be considered income to employees. The benefits must be reported on the 941 and the employee’s W-2. Examples of these benefits are: Group-term life insurance over $50,000; S-Corp insurance premiums, personal use of company automobiles, memberships, discounts, employer provided vacations, and some gifts.
Qualified Pension Plans
IRS regulations require that an “X” be displayed in the W-2 box marked “Pension Plan” for all employees who participated during any part of the year in a Qualified Pension Plan that is 100% company funded (no employee deductions). Please verify/change your employees’ pension status as needed. This box will automatically display an “X” for any employees who have had deductions for a deferred compensation plan (i.e. 401k).
Third Party Sick Pay
Federal legislation requires the reporting of both taxable and non-taxable sick pay made to employees from a third party, as well as taxes withheld on those payments. These payments must be included on the employee’s W-2. Call your third party provider to request this information ASAP. If your third party provider is unable to provide this information before your last payroll, please ask us to delay processing your W-2’s by checking the “HOLD” box. Note: All third party payments must be processed with or before your last payroll in 2020 to ensure that your 941 and W-2 reports are correct.
Section 4: W-2's
Please review your copy of the W-2/1099 Edit Report, which will be provided with your last payroll of November. It includes names, social security numbers, and mailing addresses for all of your employees. Provide any changes to your Client Support Team by December 11, 2020.
W2 errors can be avoided by reviewing employee's payroll information data prior to running the last payroll of the year. Past employees who received wages in 2020 must also receive a W2. If you can, contact former employees to verify current mailing address and make any updates prior to your last scheduled payroll of 2020.
Both paper and electronic W-2 and W-3 forms must be filed with SSA by January 31. In addition, employers must distribute W-2s to employees by January 31. Due to this accelerated filing due date, any changes made after January 5, 2021 will require amendments.
Section 5: Preparing for 2021
Reporting Agency Changes
Between now and the end of January, federal and state agencies send change notices including:
- Deposit Frequency – as company numbers grow, tax due dates can change.
- Rate changes – typically these are unemployment rate changes sent from the state.
- Additional states or localities – you will need to provide us all new ID numbers.
Please notify us as soon as you receive any correspondence regarding the above changes. Additionally, it is also important that you notify us if you have ceased business in any state or locality so that we may finalize reporting and adjust your billing.
LinkHCM is not authorized to close accounts on your behalf. We will file “Final” returns, but it is your responsibility to close the account with the state(s).
Section 6: Minimum Wage (California)
California Governor Jerry Brown signed a law raising the state's minimum wage to $15 by 2022. Specifically, the statewide minimum wage will increase to $14.00 on Jan. 1, 2021 for employers with 26 or more employees and $13.00 for employers with 25 or less employees. Many local jurisdictions have established higher minimum wages. The highest applicable wage should always be paid whether federal, state, or local. Be sure to review your state, city, and local minimum wage limits and update your employees as needed.
We encourage you to determine for yourself the status of your payroll account. We are confident you will confirm that your payroll taxes are being paid fully and on time. To verify federal tax payments, register with EFTPS
And, a special thank you from all of us at LinkHCM - we are grateful to be your partner!