Year-end payroll checklist for 2026

As the year comes to a close, payroll managers face the crucial task of preparing for the upcoming year. With the right tools and strategies, managing deadlines, compliance updates, and final payroll tasks can be straightforward.

This guide simplifies the year-end payroll process, covering everything from verifying employee data to filing tax forms and adjusting for tax law changes. You'll have all the steps you need for a smooth transition into the new year.

Section 1: before the last payroll

Fix mismatches now, while they're still adjustments and not corrections.

1. Verify business and employee information. Accuracy at year-end prevents filing delays and penalties.
   • EINs: Check the federal and state EINs for every entity you file under.
   • Company name and address: Confirm they match your tax filings.
   • Employee information: Ask employees to update their Social Security numbers, addresses, and direct deposit details through employee self-service.
   • Tip: Run the Social Security Administration's SSN verification service early, so name and number mismatches surface before W-2s are built.
2. Reconcile wages and taxes by entity and state. Totals in payroll should tie to what was reported and deposited during the year.
   • Form 941: Match wages and withholding for each quarter to the four 941 filings, including voided and manual checks.
   • State and local: Match wages by state and locality, especially for employees who moved or worked across state lines. How wages are allocated across states is worth settling before the forms are built.
   • Taxable benefits: Confirm imputed income, such as group-term life insurance, is included in wages.
   • Pay dates: Wages are generally reported for the year they are paid, so late-December pay dates decide the tax year.
3. Confirm the 2026 limits and thresholds. Three numbers go stale between years, and all of them live in payroll configuration.
   • Social Security wage base: $184,500 in 2026, up from $176,100 in 2025. Employees who reach it stop owing Social Security tax for the rest of the year. Medicare tax has no wage cap.
   • Exempt salary level: The federal minimum for most executive, administrative, and professional exemptions is $684 per week, or $35,568 a year. The Department of Labor restored that level in a technical amendment effective May 15, 2026, after courts vacated its 2024 rule. Some states, including New York and California, set higher thresholds.
   • Minimum wage: Check state and local changes that take effect January 1.
4. Communicate with employees about benefits. PTO and FSA deadlines often fall at year-end.
   • PTO and leave: Share carryover and expiration rules.
   • FSAs: Remind employees of their plan's year-end deadline. Some plans allow a grace period or limited carryover, and some don't.

Section 2: after the last payroll

Once the final payroll posts, the work shifts to totals, forms, and filings.

1. Review final payroll information.
   • Wages and salaries: Confirm total wages for the year by entity.
   • Tax withholding: Verify federal, state, and local withholdings.
   • Benefits: Confirm retirement contributions and health insurance deductions were applied correctly.
2. Distribute and file tax forms.
   • Form W-2: Furnish to employees and file with the SSA by February 1, 2027. January 31 lands on a Sunday, which buys exactly one extra day.
   • Form 1099-NEC: The reporting threshold for contractor payments is $2,000 for tax year 2026, up from $600.
   • Filing help: Greenshades year-end forms generate, print, mail, and e-file W-2s, 1099s, and ACA forms from your reconciled payroll data. Thresholds, e-filing, and corrections are covered in our year-end payroll tax reporting tips.
3. File final returns and confirm deposits.
   • Form 941: Report fourth-quarter wages and withholding. Year-end totals should tie to all four quarters.
   • Deposits: Confirm final-quarter payroll tax deposits were made on your deposit schedule.

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Section 3: getting payroll ready for 2027

Load what changed on January 1 before the first pay date uses it.

1. Update payroll schedules and policies.
   • Pay dates: Check that none land on weekends or holidays. Our guide to payroll during the holidays covers shifted processing deadlines.
   • Policies: Update payroll policies as needed and share the changes with employees.
2. Apply new tax rates and limits.
   • Social Security wage base: Load the 2027 figure once SSA publishes it.
   • State and local: Many states change tax rates or minimum wages at the start of the year, so check each state you pay in.
   • Tips and overtime: Qualified tips and qualified overtime are now reported separately on W-2s and 1099s, so payroll needs those amounts tracked apart from regular wages. The new box 12 codes on the 2026 W-2 cover what to configure.
3. Start fresh with employee records.
   • W-4s: Remind employees to submit a new Form W-4 if their situation changed. Many states have their own withholding forms.
   • Fringe benefits: Recheck health insurance and retirement plan treatment against the new year's tax rules.

Note: This information is for informational purposes only and does not constitute formal tax, legal, or compliance advice. Always consult with qualified tax advisors, legal counsel, and your organization's internal teams for guidance specific to your situation. Additional regulations may apply. For the most accurate and up-to-date information, refer to official government resources and regulatory agencies.