Year-end payroll season is here, and if you're like most business owners, you're already feeling that familiar knot in your stomach. Between W-2 deadlines, ACA reporting, and updating employee information, there's a lot that can go wrong. And the consequences of missing a deadline or filing incorrect forms can be costly.
At Whirks, we've helped hundreds of businesses get through year-end payroll season without the stress. We've seen what works, what doesn't, and what mistakes cost business owners the most time and money.
In this article, you'll get a step-by-step checklist to confidently close out your 2025 year-end payroll, avoid common filing mistakes, and prepare for a smooth start to 2026.
Why Year-End Payroll Preparation Matters
According to a CivicScience poll, nearly half (48%) of all adults admit feeling more anxious than usual during the holiday season. For payroll professionals and business owners? That number is closer to 100%.
Year-end deadlines, W-2 prep, and last-minute changes don't exactly scream "holiday cheer." But ignoring these tasks or rushing through them creates bigger problems in January. Problems like missed deadlines, frustrated employees, and potential IRS penalties that could have been easily avoided.
But with the right checklist and a little planning now, you can handle year-end payroll like a pro.
Step 1: Review and Update Employee Records Before the Deadline Rush
W-2 season is approaching, and incorrect employee information is one of the most common and preventable year-end payroll mistakes.
Verify Names, Social Security Numbers, and Addresses
If any of your employees have recently undergone a name change (marriage, divorce, legal name change) or moved to a new address, updating this information in your payroll system is crucial before W-2 forms are generated.
Incorrect or incomplete information can lead to:
- Delayed W-2 delivery
- Frustrated employees who can't file their taxes on time
- IRS penalties for incorrect Social Security Numbers
Take the time now to run a report of all active employees and verify that their names match their Social Security cards exactly. Even a middle initial error can cause problems.
Ideally, your payroll system has an option for electronic W-2s. This gives you a backup plan if mailed forms don't arrive or if employees need their forms quickly.
Step 2: Account for All Forms of Taxable Compensation
Before you generate W-2s, take time to review whether there's any additional income that needs to be reported.
Common Types of Overlooked Taxable Income
It's easy to miss things like:
- Manual checks issued throughout the year outside your regular payroll system
- Cash gifts handed out at holiday parties or company events
- Non-cash benefits, like personal use of a company vehicle
- Bonuses or awards paid outside the normal payroll cycle
Even if these seem insignificant, they must be accounted for when preparing W-2s. The IRS expects you to report all forms of compensation.
If you're uncertain about what should be reported, get in touch with your payroll specialist for guidance before it's too late.
Step 3: Know Your Year-End Payroll and Tax Filing Deadlines
You may have a payroll company taking care of these filings, but you should still have these dates marked on your calendar. Missing these deadlines isn't an option because the penalties add up quickly. Here are a few you need to know:
Critical Dates for Year-End 2025
February 2, 2026 – Form W-2 deadline (extended because January 31 falls on a Saturday)
- Employers must provide Form W-2 to employees.
- A copy of each employee's W-2 must also be sent to the Social Security Administration.
March 2, 2026 – Form 1095-C deadline for employee copies
- Applicable Large Employers (50+ full-time equivalent employees) must furnish Form 1095-C to applicable employees.
- Starting with the 2025 reporting year, you can post a notice on your website indicating that forms are available upon request instead of automatically sending Form 1095-C to all employees.
This can significantly reduce your administrative burden. However, the notice must be clear, conspicuous, and remain accessible through October 15, 2026.
March 31, 2026 – Form 1095-C electronic filing deadline with IRS
- If you file 10 or more information returns, you must file electronically
- Paper filing deadline is March 2, 2026
- You must also file Form 1094-C as the transmittal form
You should plan to have everything ready at least a week before each deadline to account for any unexpected issues.
Step 4: Review and Adjust Your Compensation Plans for 2026
If you don't already have policies for reviewing compensation, now is the time to evaluate your pay structure to remain competitive in the upcoming year.
Why do compensation reviews matter now?
Replacing an employee can cost up to two times their annual salary, underscoring the importance of retaining and rewarding your talent.
Key Items to Address During Your Compensation Review
- Check minimum wage changes – Several states have increased their minimum wage rates effective January 1, 2026. Make sure your payroll reflects these changes.
- Plan year-end bonuses strategically – Collaborate with your payroll team to distribute bonuses in a way that aligns with your preferences.
- Update benefit contributions – If you're making changes to health insurance contributions, 401(k) matches, or other benefits for 2026, now is the time to update those figures.
Competitive compensation is about the complete package: base pay, bonuses, benefits, and growth opportunities.
Step 5: Update Your Employee Handbook for 2026
Your employee handbook is one of the most important tools you have for communicating with employees. It sets expectations, outlines company policies, and provides guidance on everything from behavior to benefits.
What to Review in Your 2026 Handbook Update
Review your handbook for necessary updates, such as:
- Removing outdated policies that are no longer relevant
- Updating language to reflect changes in employment laws
- Adding new policies that address emerging workplace concerns
- Clarifying existing policies where employees have expressed confusion
Once you've finalized updates, make sure all employees review and acknowledge the changes. This acknowledgment is critical for protecting your business if disputes arise.
Many businesses struggle with creating an effective employee handbook. If you're unsure where to start, our People Services team can help you create a handbook that supports your team and protects your business.
Your Year-End Payroll Doesn't Have to Be Overwhelming
If knowing is half the battle, then you're already halfway done. As you check off each item on this year-end payroll and HR checklist, you'll gain confidence as the weight on your shoulders lightens. And this will leave you more room to savor the joys of the season with your family and friends.
This checklist will help you finish 2025 strong, from reviewing employee records to meeting critical deadlines and adjusting compensation plans.
Even with the best plans, year-end can feel overwhelming when you're juggling everything else that running a business demands. The deadlines are firm, and the details matter. The consequences of mistakes lead to costly penalties, frustrated employees, and time-consuming rework in January.
If you're feeling overwhelmed or need help managing the complexities of year-end payroll and HR compliance, we're here to help. Our team at Whirks handles year-end processing for hundreds of businesses, and we'd love to take this burden off your plate.
Ready to make year-end payroll painless? Let's chat about how Whirks can help you close out 2025 confidently and start 2026 strong.
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