Key Takeaways
- Focus on data integrity. Ensure payroll wages, taxes, benefits, and GL postings are clean, consistent, and reconciled.
- Your tax preparer depends on one crucial “three-way match”: W-2 totals, Form 941 totals, and the General Ledger wage expense should align perfectly.
- December is the time to correct employee info, mapping issues, benefit deductions, PTO accruals, and misclassifications before they become tax-season corrections.
- Scheduling a brief hand-off with your tax professional in early January prevents unnecessary delays and costly rework.
You’re definitely not the only one overwhelmed by EOY payroll tasks. I talk to a lot of Roseville business owners around this time who are intimidated by this stack of hyper-technical tasks (that could mean future problems if something gets missed).
So before you run that final payroll of the calendar year, I want to give you a preparing-for-payroll checklist that breaks it all down.
Here’s what I focus on with every client to make sure your business is protected and your tax professional gets the clear financial data they need.
1. Finalize Chart of Accounts Mapping
A tax return is only as accurate as the books behind it. And payroll is one of the most sensitive areas. That’s why year-end is the time to verify that your numbers tell the truth.
Clean mapping is one of the biggest gifts you can give your CPA. And every payroll platform pushes data into the GL, but not always into the right place. So, before the last payroll run:
- Look at your last three payroll journal entries. Confirm Gross Wages hit the Wages Expense account (P&L); Taxes Withheld hit the Payroll Tax Liability account (Balance Sheet); and Employer-Paid Taxes hit the Payroll Tax Expense account (P&L).
- Look for “uncategorized” or “suspense” items. Those pretty much always become headaches in January.
2. Run a full-year payroll register audit
This goes beyond checking totals. Look for things like employees who had deductions start or stop mid-year, benefit adjustments that don’t match documentation, garnishment changes without corresponding payroll notes, and voided or corrected checks that may not have posted correctly.
It’s not glamorous work, but it prevents amended returns and W-2 corrections later.
3. Establish the three-way match
Before you close the year, these three must align:
- W-2 total wages
- Form 941 quarterly totals added together
- Wage expense in the General Ledger
If even one number is off, your tax professional must stop everything and trace the discrepancy backward through all 12 months. A clean match is the single best indicator that your payroll year is ready for tax filing.
4. Collect supporting documentation
Start gathering these things now:
- W-9s for any vendors who should receive a 1099
- Records of employer retirement contributions made outside payroll
- Health insurance premiums paid directly (if applicable)
- Notes about late-year employee changes (address updates, bonuses, pay adjustments)
Your payroll system doesn’t always know about these items. But your CPA needs them to prepare accurate W-2s and 1099s.
I always encourage clients to schedule a short January meeting with their tax preparer in which you present clean, reconciled payroll totals, and your CPA can ask clarifying questions before filing season gets chaotic.
A final word
The important thing here is that you give this year-end payroll checklist your early attention. Because when the data is clean and supported with the right documentation, your tax professional can do their best work… And YOU start the new year with clarity instead of questions.
If you’re unsure whether your payroll data is as clean as it ought to be, I’m here to walk through it with you:
5staraccountingandbusiness.com/schedule/
FAQs
“What numbers should match before we close payroll for the year?”
This is the cornerstone of clean payroll. Your W-2 wages, 941 quarterly totals, and GL wage expense should all align. If not, we need to resolve the discrepancy before sending anything to your tax professional.
“Why does my CPA need info that’s not in the payroll system?”
Because payroll systems don’t capture everything, like employer-paid retirement contributions, owner health insurance, or manual adjustments. Your CPA needs the complete picture to file accurate returns.
“What happens if W-2 wages don’t match the 941s?”
Your tax professional will have to investigate, which delays filings and sometimes triggers IRS notices. Matching now avoids that entirely.
“When should I schedule the payroll hand-off to my tax preparer?”
Ideally, the first two weeks of January. By then, payroll is closed, and your CPA can integrate your data into their tax preparation workflow before things get busy.
“What if we find payroll errors after December 31?”
We can still fix them, but corrections after year-end often require amended filings (W-2c, corrected 941s). Cleaning it now avoids unnecessary paperwork.