Clean Up Your Payroll Records Before Year-End

When most employers think about year-end payroll, they think about December. The last few payrolls, bonuses, holiday schedules, and then, almost immediately, W-2 season.

But the smoothest year-end payrolls don't actually start in December. They start in October, with something much less exciting: making sure your employee information is correct.

Taking time to clean up your payroll records now can prevent headaches later. Every outdated address, misspelled name, or incorrect Social Security number you catch today is one less issue you'll be scrambling to fix in January or correcting with a W-2c in March.

Why October Is the Right Time Begin Clean-up of Your Payroll Records

For the 2026 tax year, employers generally must furnish W-2s to employees and file them with the Social Security Administration by February 1, 2027.

The weeks leading up to that deadline are already busy with holidays, year-end closing, and benefit changes for the new plan year.

Starting in October gives you enough time to catch problems, follow up with employees who don't respond, and make corrections before the final payrolls of the year. It's early enough to fix things calmly and close enough to year-end that employees understand why you're asking.

What Employees Should Verify

Ask every employee to review their information, not just the ones you think might have changed something. At minimum, that should include:

• Legal name and Social Security number. These need to match Social Security Administration records. Name changes after marriage or divorce are common reasons information may need updating.

• Mailing address. Especially if you mail W-2s. Anyone who moved this year and didn't update their address is a returned envelope waiting to happen.

• Federal tax withholding (Form W-4). Employees aren't required to submit a new W-4 every year, but changes such as marriage, divorce, a new baby, or a second job may mean it's time to review their withholding.

• State tax withholding. For North Carolina employees, that's Form NC-4. Employees who live or work in other states may need different forms.

• Direct deposit information. Make sure employees know how to securely review and update their account information.

• Emergency contacts and personal email. While not technically payroll-related, year-end is a great time to update these records, too.
  

Make It Easy for Employees to Respond

If you want employees to actually do this, make it quick and give them a deadline.

"Please review your information" with no due date is probably going to sit in an inbox until January.

Try something like:

"As we head toward the end of the year, please take five minutes to review your information in [payroll system] by [date]. Check your legal name, address, tax withholding, and direct deposit details. If anything needs to change, you can update it there or reach out to [name]. Accurate information now helps make sure your W-2 is correct and delivered on time."

If your payroll system has an employee self-service portal, include the link. The fewer clicks, the more likely employees are to follow through.

And just like with open enrollment, don't assume silence means everything is fine.

Follow up with employees who haven't confirmed their information. Maybe they missed the email. Maybe they meant to get to it. Maybe they don't remember their login.

A second reminder takes a lot less time than a corrected W-2.

Don't Forget About Employees Who Claimed Exempt

If any employees claimed exempt from federal income tax withholding on their W-4 this year, that status doesn't automatically carry over.

To maintain exempt status for 2027, eligible employees generally need to submit a new W-4 claiming exemption by February 16, 2027.

If they don't, employers must begin withholding federal income tax using the applicable default withholding rules.

That can mean a noticeably smaller paycheck and an unhappy employee who didn't see it coming.

Flag these employees now and remind them of the deadline before it sneaks up on them.

Be Careful with Direct Deposit Change Requests

Here's one that catches a lot of small businesses: payroll diversion scams.

Someone impersonates an employee, usually by email, and asks HR or payroll to update their direct deposit information. The next paycheck goes straight to the scammer, and the real employee doesn't find out until payday.

Never change direct deposit details based on an email alone.

Verify the request through a second channel, such as a phone call to the number already on file, an in-person conversation, or a change the employee makes through your secure payroll portal.

It's a simple safeguard that can prevent a very expensive mistake.

Check What Else Belongs on the W-2

While you're reviewing records, look at anything that needs to show up on a W-2 but may not be tracked in payroll yet.

Taxable fringe benefits are common examples, including personal use of a company vehicle, gift cards or cash-equivalent gifts, taxable group-term life insurance coverage over $50,000, and certain reimbursements.

HSA contributions and year-end bonuses also need to be reported correctly. Bonuses are generally treated as wages and must be processed through payroll with applicable withholding.

The holiday gift card you hand out in December is a lot easier to handle correctly if you plan for it in October.

Coordinate with your payroll provider or tax professional to make sure these items are handled properly.

Year-End Payroll Preparation Doesn't Have to Be Complicated

You don't need a massive audit or a week set aside for data cleanup.

You need employees to confirm their information is correct, a plan to follow up with those who don't respond, and a review of anything else that needs to be included on the W-2.

Don't wait until December to clean up your payroll records. A little preparation now can make year-end payroll and W-2 season a whole lot smoother.

Need help getting your employee records ready for year-end? Employers Advantage LLC can help you organize employee verification communications, review HR records, identify items that need payroll attention, and coordinate with your payroll team or provider.

Because the best time to fix a year-end payroll problem is before it becomes one. HERE ARE SOME FREQUENTLY ASKED PAYROLL CLEAN-UP QUESTIONS WE GET ASKED: When should employers start year-end payroll preparation?

October is a good time to begin. Reviewing employee information early gives businesses time to correct errors, update records, and prepare for W-2 reporting before the busy holiday season.

What employee information should be verified before W-2 season?

Employers should encourage employees to verify their legal name, Social Security number, mailing address, tax withholding information, and direct deposit details. Emergency contacts and personal email addresses can also be reviewed.

When are 2026 W-2 forms due?

For the 2026 tax year, employers generally must furnish W-2 forms to employees and file them with the Social Security Administration by February 1, 2027.

Do employees need to submit a new W-4 every year?

Most employees do not need to submit a new Form W-4 annually. However, employees claiming exemption from federal income tax withholding must generally renew that exemption each year to maintain it.

How can employers prevent payroll diversion scams?

Employers should verify direct deposit change requests through an established, secure process rather than relying on email alone. Using a trusted phone number or secure employee portal can help prevent fraudulent changes.

How can Employers Advantage LLC help businesses prepare for year-end?

Employers Advantage LLC can support businesses with employee record reviews, verification communications, HR documentation, and coordination with payroll providers to help make year-end preparation more organized.