2025 Year-End Payroll Reminders
The year-end period is demanding for business owners, particularly when managing payroll requirements and deadlines. PayWorks has compiled a comprehensive checklist of payroll tasks that need to be completed by the start of the new year, along with some helpful reminders for business owners.
Last 2025 Processing Date
The last day to run payroll or adjustments affecting 2025 employment tax returns and W-2 forms will be Monday, December 29th, at 3:00 p.m. EST.
Update Employee Addresses
It is important to maintain accurate employee addresses for W-2 purposes. Incorrect addresses may cause W-2 forms to be delayed or returned, and charges can be incurred for reprints. If the payroll system recognizes any missing information, you will receive a report attached to the payroll package. Also, please remind your employees to update their addresses if necessary, including any apartment number if applicable. Your Account Representative can provide a list of all your active and terminated employees if you would like to verify the information on file.
Bonus Checks
Bonus checks can be processed in various ways based on your preferences.
Regular payroll or through a separate payroll processing run: Bonus checks can be issued with a typical payroll check date or with a special payroll processing run, which may have a different check date. Either way, the amount can be displayed as a "Bonus" or with a description of your choice on the employee pay statements. If processed with regularly scheduled payroll, bonus checks can be added to the regular check or issued as a separate check. If using direct deposit, you can also process live checks on an exception basis.
For a specific net amount: We can perform a "gross-up" calculation if you'd like a specific net amount on the bonus check. Should you wish to use this method, please submit the figures to us at least one day prior to the processing day. Bonuses for specific net amounts must be processed as a separate check.
Taxation Method: The IRS considers bonus payments to be supplemental wages and defines two taxation options for federal income tax purposes. They can be taxed using the standard W-4 calculations or at a flat 22%. Payments exceeding $1 million will be taxed at a flat 37%. Each state defines its own methods for supplemental pay, such as bonuses. Your Account Representative will review those options with you.
Deductions: Determine which, if any, deductions should be taken on the bonus payments. Items to consider include retirement plan contributions, insurance deductions, loans, and garnishments, among other financial considerations.
Funding for High-Dollar Payments: If using direct deposit and the payroll run exceeds $500,000 or an individual entry exceeds $100,000 (net), a wire transfer must be used to fund the direct deposit.
Form 1099-NEC
If PayWorks has paid your independent contractors during the year, we will ask you to confirm whether you wish to observe the mandated filing threshold amounts or have us issue a 1099-NEC to all independent contractors. The forms will be billed at the same fee as W-2 forms. The due date for filing the 1099-NEC is February 2nd, 2026.
For clients who have paid their independent contractors directly and would like PayWorks to create and file either 1099-NEC or 1099-MISC forms (e.g., for rents or royalties), please contact your Account Representative regarding data submission and pricing.
Third-Party Sick/Disability Pay
If any employee (current or former) collected disability payments from the state insurance fund or a private insurance carrier, those payments need to be reported for employment tax purposes on your payroll account. The taxable portion of these payments must be included on the employer's Form 941 calculations and state tax returns as applicable.
Disability payers will typically notify employers of the payee and payment amount for payments made during the year. If you haven't done so, please forward these notifications to PayWorks immediately. Each disability payer must also provide a recap to employers of all payments made in the 2025 calendar year by January 15th, 2026.
If any of your employees collected disability in 2025 and you have not forwarded the periodic payment amounts to PayWorks, please notify us so we can hold the filing of the quarterly reports and printing of the W-2 forms. If PayWorks is not notified and the quarter has been closed, any additional entries will result in a minimum reprocessing fee of $400 plus the reprinting of all W-2 forms at $7.50 per form.
Non-Cash Taxable Fringe Benefits
If you provided non-cash taxable fringe benefits to employees during the year, the value of those benefits must be reported, and in most cases taxed, through the payroll. If you are unsure if non-cash benefits are reportable, please check with us and your accountant. Examples of these types of benefits include, but are not limited to:
Personal use of a company vehicle
Group term life or other employer-provided insurance with W-2 reporting implications
S-Corp 2% shareholder health insurance premiums
Paid Time Off Accruals
Please review your paid time-off policies regarding carry-over and payout options. These options are typically defined by either state-mandated plan requirements or your company policy. You can refer to the Accrual Report in your latest payroll report package if you requested accrual tracking as part of your payroll services. Please get in touch with your Account Representative to discuss your options.
W-2 Delivery
We anticipate that employee W-2 forms will be ready for shipping by mid-January. We offer three delivery options to choose from:
With your standard payroll delivery
Via Priority Mail or FedEx to your office as soon as they are printed and packaged
Mailed directly to the recipients
Please notify your Account Representative of your choice so we can expedite delivery once the forms are ready.
Your Annual Report email from PayWorks will also include copies for employees. These digital versions will allow you to print copies if an employee requests one at a later date. However, if you would like PayWorks to reprint or resend a physical copy, a $7.50 fee plus postage will be applied. For security purposes, any W2 reprint requests must be made through you to your Account Representative. Requests made directly to PayWorks by the employee will not be honored since we can't verify the employee's identity.
Holiday Processing Schedules
PayWorks will be closed on Thursday, December 25th, and Thursday, January 1st, 2026, which are also bank holidays. If you are using our tax filing or direct deposit services, we must run the payroll two business days before the check date to ensure the appropriate funds transfers are made on schedule. An exception can be made for direct deposit, but the transfer agent charges a fee of $35.00 for a 24-hour window.
Please keep in mind that the payroll check date determines the year in which it is reported for payroll tax purposes. If you need a payroll to appear in the 2025 tax reports or W-2s, it must be processed with a check date by December 31st. Please schedule it with your Account Representative accordingly.
Priority Mail Delivery
Due to the volume of mail handled during the holidays and the possibility of inclement weather, your payroll reports may be delayed if you use this service. We cannot guarantee the delivery day and time once the package reaches the Post Office. Your account representative can forward your tracking number if you would like to track the package. Please consider on-site printing (we supply the check stock and envelopes) or emailed pay statements as alternatives to hard copy delivery. The post office also increases postal rates during the holidays, so your postage fee will be adjusted accordingly. You may prefer to use FedEx 2-Day instead of Priority Mail. If so, please notify your Account Rep.
2026 Minimum Wage
States often increase their minimum wage, effective as of the first of the year. If you currently have employees paid the minimum wage, please contact your account representative or click here for the latest information from the Department of Labor regarding any new minimum wage requirements. These will not change your employees' pay records automatically.
Contact your PayWorks Account Representative to discuss the end-of-year payroll checklist at your convenience. The earlier you start, the smoother the transition will be.
PayWorks is not providing legal or tax advice. The information on this website is for informational purposes only and should not be relied upon as legal or tax advice. You should consult with your own legal and tax advisors before making any decisions about your financial situation.