December checklist, Quarter 4 and year end filings for business in the United States

If you’re enrolled in Wave Payroll's automated tax payment and filing service, take the steps provided in this guide before December 31 to ensure your filings are accurate. Payroll customers based in self-service tax states, or who have chosen to pay and file on their own, may find many of these steps helpful though not all will apply.

At a glance

Bring everything together with reconciliation
Make sure benefits enjoyed this year are included on 2020 payrolls
Reflect on business structure changes this year
Preview your W-2 forms
Review year-end direct deposit schedules
Audit your contractor information
Update employee tax profiles for 2021
Confirm your deposit frequency for 2021 
Verify employer tax rates for 2021 
Get your 2020 forms to the SSA, IRS, State/Local agencies, and to your workers

Bring everything together with reconciliation

If you pay your employees by check, perform a payroll bank reconciliation through December 31, 2020. Look for outstanding checks and make sure you've accounted for employee expense reimbursements. Compare state and federal payroll tax withdrawals from your bank account to the amounts on your tax liability records. To review payroll taxes in Wave, go to Payroll > Taxes For more steps and insight into year-end accounting, check out: Accounting year-end checklist

Make sure benefits enjoyed this year are included on 2020 payroll

If you are missing a benefit and have yet to run your final 2020 payroll, you will be able to add it to payroll before the end of the year. To do this, go to the employee profile > click Benefits & Deductions.

If you're missing a benefit and cannot add it to a future payroll in Wave, please contact our Support Team as soon as possible. Please include the employee name, the benefit or deduction name, and the amount.

A reminder that January 7, 2021 is the last day for those enrolled in Tax Services to request adjustments to Form W-2 prior to SSA submission. Adjustments requested after this date will require a Form W-2C.

Reflect on business structure changes this year

If you made changes to your business structure in 2020 that resulted in a new EIN (e.g.  incorporating from a sole-proprietorship), you will need a set of year-end forms with your old EIN from before the business structure change and another set with the new EIN and wages paid after the change. You’ll need to create a second business in Wave for your restructured business. 

Preview your W-2 forms

Take advantage of previewing your W-2 forms now to make sure you’ve entered correct wages, benefits and employee information for 2020. Learn about common mistakes and how to fix them, and read more about new reporting requirements for 2020 in our guide here:

Review year-end direct deposit schedules

As 2020 comes to a close, it's important to keep direct deposit timelines in mind. Payrolls and direct deposits do not process on Federal bank holidays. This means if a bank holiday falls on the day you normally approve payroll, pay employees, or anytime in between, you must approve payroll at least one business day earlier. 

Federal Bank Holiday Date
Thanksgiving Thursday November 26, 2020
Christmas Day Friday December 25, 2020
New Year's Day Friday January 1, 2021

December 28, 2020: The last day to approve a direct deposit payroll with a 2020 pay day. Make sure that your payroll is approved no later than 3:30PM ET on December 28, 2020 for the payroll to be reported in the 2020 tax year.

January 7, 2020: If you are enrolled in Tax Services and pay employees by check, this is the last day to approve a payroll with a 2020 pay day in Wave.

Audit your contractor information

In order for contractor payments to show up on Form 1099-NEC at year-end, the contractor must have been listed as a contractor in your Vendors list. If you need to update this, here's how:

  1. Under Purchases > Click Vendors
  2. Select the Vendor Name
  3. Click the arrow under Actions > Click Edit
  4. Under the vendor name > Locate Type
  5. Update the vendor type to 1099 contractor > Click Save

Make sure to review and confirm all contractor Tax Identification Numbers (TIN). If your Vendor is an Individual, ensure that their Social Security Number (SSN) is correct, and that their name matches what is on their SSN card. If your Vendor is a Business, ensure their Employer Identification Number (EIN) and Business Legal Name are correct.

Review contractor bills and bill payments

January 2021: 1099-NEC Forms will be available to generate in Wave

January 25, 2021: This is the deadline to e-File 1099-NEC forms with Wave, to ensure timely filing with the IRS. After this date, you can still e-File with Wave, however, late fees from the IRS may apply. 

If you paid contractors outside of Wave in 2020, make sure you have created bills in Wave and recorded manual payments. This will ensure these contractor payments are reported on the 1099-NEC. 

If you paid your contractor less than $600 in 2020, you are not required to file a Form 1099-NEC.

What is Form 1099-NEC?

As a result of The Path Act, beginning with tax year 2020 the IRS requires Form 1099-NEC to report non-employee compensation. The Form 1099-NEC must be filed when you have paid at least $600 during the year for services performed by someone who is not your employee.

For more information please see Instructions for Forms 1099-MISC and 1099-NEC (2020) and the 2020 General Instructions for Certain Information Returns.

Update employee tax profiles for 2021

January 1, 2021: If any employees are updating their withholding for 2021, ensure that they fill out the new W-4 Employee Withholding Certificate issued by the Internal Revenue Service (IRS), as well as a new state W-4 if applicable.

Confirm your deposit frequency for 2021

December 2020: Review your lookback period for IRS withholding to ensure you have the correct deposit frequency heading into January 2021.

If you are a 941 filer (quarterly), your lookback period is July 1, 2019 - June 30th, 2020. If you have been a 944 (annual) filer for the current year, or in the past two years, your lookback period is the 2018 calendar year. Regardless of your filing status, if you have reported $50,000 or less of taxes for the lookback period, you are a monthly depositor. If you have reported more than $50,000 in the lookback period, you are a semiweekly depositor.

The IRS and/or State agencies may send you a notice before the end of 2020 regarding tax deposit/filing frequencies. If you receive a notice or have changes due to your lookback period, update those details in Wave from Settings > Tax Profile to ensure you don’t miss payment deadlines in 2021. Do this as early as possible - you can make the effective date January 1st, 2021.

Verify employer tax rates for 2021

November 2020: State agencies will begin to issue 2021 Unemployment Tax Rates. If applicable, update your tax rate in Wave from Settings > Tax Profile to ensure taxes will be calculated correctly for next year.

Get your 2020 forms to the SSA, IRS, State/Local agencies, and to your workers

January 31, 2021: This is the last day to file Forms W-3/2 with the Social Security Administration (SSA), and Form(s) 1099-NEC with the IRS. This is also the last day to get these forms to your employees and contractors.

Note: If the filing deadline falls on a weekend it is moved to the following business day. This means you have until February 1st, 2021 to file these forms for the 2020 tax year.

For specific due dates and filing guidelines for your State and Local agencies where applicable, reach out to those individual tax departments for further insight.

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