10 Things to Check Before Year-End Payroll

This year went by pretty quickly to say the least. It probably feels like just yesterday you were approving summer leave, and now you’re staring at year-end reports wondering where time went.

It’s the season of W-2 prep and last-minute tax questions. And if you’re not careful, it can also be the season of preventable mistakes.

The good news? A little cleanup now can make 2026 start off a whole lot smoother.

We’ve seen the same issues trip up business owners every year. Most of them are easy to fix if you catch them early.

Here’s what we think you should double check before 2026 rolls in!

1. Verify Employee Information

Let’s start simple. Open your employee list and look at every name and mailing address. If someone moved or got married, make sure you update it. It sounds obvious, but wrong info can delay a W-2 or bounce it back. A quick review now keeps everything moving later.

2. Reconcile Payroll Taxes and Forms

Take your quarterly 941 forms and line them up with your year-end totals. Wages, withholdings, and contributions need to match. If they don’t, find out why before you file. It’s easier to fix a small mismatch now than dig through reports in February trying to figure out what went wrong.

3. Don't Skip the Fringe Benefits

Company cars, health insurance, cell stipends. All those extras count as taxable income (in most cases). Make sure the value of each benefit is added to the right employee’s wages before you send out W-2s. Forgetting one can throw off your totals and trigger an IRS letter you don’t want.

4. Plan Bonus and PTO Payouts

Be mindful of when you give out bonuses or PTO payouts. Anything paid in December 2025 shows up on 2025 wages, but if it goes out in January, it belongs to 2026.

The timing decides which year it’s taxed.

5. Check Your Business Details

While you’re checking employee info, take a second to review your own. Your business name, address, and EIN should match everywhere. If you’ve moved or made any changes this year, make sure you update everything before filing.

6. Review Worker Classifications

Before you send 1099s, make sure every contractor is really a contractor. If someone works under your supervision or uses your tools, they might actually belong on payroll as a W-2 employee.

Not sure where to start? Read about the difference between a W-2 and 1099 contractor.

7. Review State and Local Accounts

Each state runs things a little differently. Some adjust unemployment benefit amounts or local tax rules every January (based on cost of living adjustments).

Make sure you confirm current rates and any changes before the first paycheck of the year!

8. Reconcile Payroll Liabilities

Do one last sweep of your books. This includes taxes, benefits, and garnishments. Every dollar that’s withheld should have been sent to the right agency. Balancing your liability accounts before year-end means you’ll start January knowing nothing slipped through the cracks.

9. Back Up Your Records

When you’re done, store your reports somewhere safe (like Megapay 😉). Keep copies of all forms like W-2s and your 941s. You’ll be glad you have them if an employee or auditor asks for something next year.

10. Farewell 2025 👋

Before you log off for the holidays, check what might be changing starting January. New minimum wages, benefit limits, or overtime rules can impact you!

Year-end payroll can feel like a lot, but it doesn’t have to. A quick review of the basics can save you hours later.

And if you’re ready to pass the heavy lifting off, Megapay is here to help!

We’ll get your W-2s, reports, and filings done so you can start 2026 focused on your goals, not your spreadsheets.