MANAGING YEAR-END PAYROLL & 1099 REPORTING FOR 2024
As year-end approaches, it is time to focus on wrapping up 2024 and gearing up for the new payroll year. There are certain payroll requirements you must complete. Use our end-of-year payroll checklist to complete all your payroll and 1099 tasks on time and set your business up for a successful new year.
1099 Reporting
Form 1099 forms are due to recipients by January 31, 2025. The forms are also due to the IRS by January 31, 2025, in most cases. If you are issuing more than 10 forms (W2s and 1099 combined), you are required to electronically file the 1099 forms to the IRS.
1099 Downloadable Worksheet here.
Note: The IRS can access failure to file penalties. Penalties may be up to $550 per form if failures are deemed to be an intentional disregard to file.
Form W-2 Reporting
The following is a list of fringe benefits required by the IRS to be included in employees’ W-2s:
- Health and dental insurance premiums paid for S-corporation shareholders
- Life insurance premiums paid for S-corporation shareholders
- Long-term care insurance premiums paid for S-corporation shareholders
- Disability insurance (STD & LTD) premiums paid for S-corporation shareholders
- Health insurance premiums paid for employees (see below for additional information)
- Group term life insurance above $50,000
- Personal use of company-owned vehicles – Downloadable Worksheet here
- Certain transportation, commuting, and parking benefits
Employer Social Security Numbers
The IRS allows the truncation of employee social security numbers on the employee copy of the W-2. Do not truncate the employee’s SSN on the copies filed with the social security administration or other state and local agencies. The truncation is optional for employers, for those choosing to do so, the SSN should be formatted as follows: xxx-xx-1234.
Minnesota Revenue
Minnesota requires electronic filing of Form W-2 and Form 1099 (with MN withholding) if you have more than 10 forms. Submit forms using your Minnesota e-Services account.
Cafeteria Plan
The amount that an employee can contribute to a flexible spending account (FSA) of a cafeteria plan for health expenditures is limited to $3,200 in 2024 and $3,300 in 2025.
Dependent Care
The maximum contribution amount an employee can make is $5,000 per year. Employers offering this benefit as part of their cafeteria plans need to be aware that additional reporting is required on the W-2.
Health Insurance Premiums
Employers who issue 250 or more W-2 Forms are required to disclose the cost of employer-sponsored health coverage. These amounts should include employer-paid and employee contribution. Amounts are reported in box 12 with code DD. Employers with fewer than 250 employees are exempt from this disclosure requirement.
ACA Reporting
Employers that are applicable large employers (at least 50 full-time equivalent employees) are required to provide employees with forms 1095-C on or before April 1, 2025. The due date for filing 1094-C/1095-C by paper filing with the IRS is February 28, 2025, and for electronic filing with the IRS is March 31, 2025.
Health Savings Account
Health savings accounts (HSA) may only be used in conjunction with a high-deductible health insurance plan. The total amount an employee or employer can contribute to an HSA account is limited to $4,150 for single coverage and $8,300 for family coverage in 2024 and $4,300 and $8,550, respectively, for 2025. Taxpayers age 55+ can make an additional catch-up contribution of $1,000 for both 2024 and 2025.
Federal Unemployment Tax (FUTA)
The standard FUTA rate is 6.0%; generally, employers receive a credit of 5.4% when they file their Form 940. This results in a net FUTA rate for most states of 0.6%. However, some states are subject to a FUTA credit reduction if they have not repaid loans from the federal unemployment trust fund. For 2024, Minnesota is not a credit reduction state and is eligible for the full credit of 5.4%. For a complete list of credit reduction states, visit the IRS website and search FUTA Credit Reduction.
Internal Revenue Service website – link here.
FICA Tax
The 2024 Social Security wage base is $168,600 but will increase to $176,100 for 2025. The employee and employer social security tax rate is unchanged at 6.2%. The Medicare tax rate is also unchanged at 1.45%. Employers are required to withhold the additional Medicare tax on employee wages in excess of $200,000 at a rate of .9%. This is an employee tax only and not matched by the employer.
YEAR-END PAYROLL CHECKLIST
Below is a simple guide that walks you through your year-end payroll responsibilities.
We have broken down the year-end payroll process into nine easy steps. This way, you can close out your payroll and ensure that you file all the proper tax forms on-time. Download the Year-End Payroll Checklist below so you can mark your progress.
