Payroll year-end has a hard deadline that does not move: W-2s and 1099s are due January 31. The work that makes that deadline painless — verifying names and IDs, reconciling wages, and sorting bonuses correctly — is best started now, not in a panic during the first week of January. This year-end payroll checklist walks through what small business owners need to do to close out the year clean and file on time.
What should be on a year-end payroll checklist?
A year-end payroll checklist comes down to verifying people, reconciling numbers, and filing forms on time. Before the year closes, work through these steps:
- Verify employee information — confirm legal names, Social Security numbers, and current addresses so W-2s are correct
- Collect and confirm W-9s from every contractor you paid this year
- Reconcile payroll — make sure total wages, taxes withheld, and deposits match your books and payroll reports
- Record fringe benefits and special wages such as bonuses, S-corp owner health insurance, and personal use of a company vehicle
- Review worker classification to be sure employees and contractors are labeled correctly
- File and furnish W-2s and 1099s by January 31
When are W-2s and 1099s due for 2026?
Both W-2s and 1099-NEC forms are due January 31, 2027 — the same date to send copies to workers and to file with the government. Specifically:
- W-2s: furnish to employees and file with the Social Security Administration by January 31
- 1099-NEC: furnish to contractors and file with the IRS by January 31
There is no automatic 30-day extension for these forms anymore, so January 31 is a firm target. Getting your contractor and employee data verified in the fall means you are simply pressing submit in January instead of chasing down missing Social Security numbers.
Do I report an employee bonus on a W-2 or a 1099?
An employee bonus always goes on the W-2, never on a 1099. Bonuses, holiday pay, and commissions are supplemental wages, which means they are subject to payroll and income tax withholding just like regular pay (federal rules commonly apply a flat 22% withholding rate to supplemental wages). Only genuine independent contractors receive a 1099-NEC. Handing an employee a 1099 for their holiday bonus is one of the most common year-end payroll mistakes, and it can create tax problems for both the employee and your business.
Who needs to receive a 1099-NEC?
You generally send a 1099-NEC to any unincorporated contractor or vendor you paid $600 or more for services during the year. To file accurately you need a completed W-9 from each one showing their legal name and taxpayer ID number. A few tips that save headaches in January:
- Request W-9s before you pay a new contractor, not at year end
- Payments to most corporations are exempt, but attorneys are an exception
- Payments made through a card or third-party network are usually reported by the processor, not by you
For construction and trades businesses that rely on subcontractors, clean W-9 records all year are what make 1099 season a non-event. Our Payroll & Certified Payroll services keep this organized so nothing slips through before the deadline.
How do I avoid year-end payroll mistakes and penalties?
Most penalties come from late filing or wrong information, and both are avoidable with a little lead time. The IRS charges a per-form penalty that grows the longer you wait past January 31 and applies to each incorrect or missing form. To stay clean:
- Verify names and taxpayer IDs against W-9s and Social Security cards before filing
- Reconcile your final payroll totals to your bookkeeping so the numbers agree
- Confirm you are e-filing if you have 10 or more total information returns
- Handle owner and fringe benefit items before the last payroll of the year
One detail that trips up owners of S corporations: health insurance premiums paid for a more-than-2% shareholder generally must be added to the owner's W-2 wages before the final payroll runs. The same goes for the taxable value of personal use of a company vehicle. Because these adjustments flow through payroll, they are far easier to record in December than to correct with an amended W-2 in February.
Don't overlook state and local filings either. Many states, including Minnesota, have their own year-end reconciliation forms and wage reports with deadlines that line up around the same window. A quick review of your state requirements now keeps a federal-only checklist from leaving a gap.
Year-end payroll is one of those tasks that is simple when the records are current and stressful when they are not. If you would rather hand off W-2s, 1099s, and the whole close, we are glad to take it off your plate so you hit January 31 without the scramble.