Year-end payroll
Year-end payroll is the work you do at the close of the calendar year to reconcile wages and taxes and issue Forms W-2 and 1099.
- LAW
- 26 U.S.C. §6051 and §6071(c)
- E-FILE LIMIT
- 10 or more information returns in total
- DEADLINE
- January 31, or the next business day
- WATCH FOR
- Assuming a Form W-2c fixed the related filings
You reconcile every pay run of the year against what you reported to tax agencies before any form goes out. Discrepancies often trace to a missed correction, a benefit deduction changed mid-year, or an employee’s move between states that withholding missed. Then the forms follow: Forms W-2Form W-2. Form W-2 is the annual wage and tax statement you give employees and file with the Social Security Administration, reporting wages paid and taxes withheld.Click to open the term for employees, Forms 1099-NECForm 1099-NEC. Form 1099-NEC is the IRS information return you file to report nonemployee compensation: payments for services to an independent contractor or other nonemployee.Click to open the term for contractors, and the annual Form 940Form 940. Form 940 is the IRS annual return reporting the federal unemployment (FUTA) tax you owe on the first $7,000 a year of each employee’s wages.Click to open the term for federal unemployment tax. All three are generally due January 31, so the work crowds into a few weeks.
What has to reconcile?
Your year-end figures should agree in each pair below before you file. When your Forms W-2 and W-3 disagree with your Forms 941, the IRS contacts you to resolve the discrepancy.
| RECONCILE | AGAINST |
|---|---|
| Boxes 2, 3, 5, and 7 on Form W-3 | The year’s four Forms 941 |
| Form W-3 totals | Every Form W-2 it transmits |
| Gross wages, withholding, and pre-tax deductions | Payroll records and bank remittances |
| The Form 940 state credit | State unemployment tax actually paid |
How do you work through it?
- 01
Before December ends. Gather taxable fringe benefit and third-party sick pay amounts, and verify employee names, addresses, and Social Security numbers.
- 02
Before the final paycheck. Compare filed quarters with year-to-date totals, while a payroll remains to correct errors on.
- 03
Before forms are filed. Fix errors on the originals. Afterward, most Form W-2 errors need Form W-2c, and a Form 941 error needs Form 941-X.
- 04
By January 31. Furnish and file Forms W-2 and 1099-NEC, with Form W-3 and, for paper 1099s, Form 1096. Also file Form 940 and the fourth-quarter Form 941.
What is due in January?
A due date on a Saturday, Sunday, or legal holiday moves to the next business day.
- January 31Forms W-2, W-3, and 1099-NEC, Form 940, and the fourth-quarter Form 941 are due.
- February 10Form 940 and the fourth-quarter Form 941, when every deposit was made on time and in full.
- Penalty deadline: August 1After this date, the penalty per late 2026 Form W-2 rises from $130 to $340.
Frequently asked
- General Instructions for Forms W-2 and W-3 (2026)
- Instructions for Forms 1099-MISC and 1099-NEC (12/2026)
- Publication 15 (2026), (Circular E), Employer’s Tax Guide
- 26 U.S.C. §6071, Time for filing returns and other documents
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.