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Getting Ready for W-2 Season

For business owners, it's almost that time again. Those brief three weeks after the holidays and festivities of December when you and your accounting department (which are often one in the same) are expected to pull payroll records, calculate year end totals and reports, and generate those all-important W-2 forms for each person in your employ in the previous tax year. Don't break out in stress hives just yet. There are several steps you can take to ensure a smooth 2006 W-2 season:

Check reports for accuracy. Make sure that your year-to-date payroll information is correct. Rather than waiting until after your last payroll is completed for 2005, take a review of your current list. Are there any payroll items that are duplicated, missing or showing errors? Hunt down missing data and make any necessary corrections now.

Terminated employees. Make certain that terminated employees show a notation in their employee status column. Also be sure that you have a current address for terminated employees in order to send out their W-2 in January.

IRS Requirements. Understand what the IRS requires of your business particularly for issues such as pension, deferred compensation, dependent care, auto usage, stockholder health insurance, and group life insurance over $50,000. If you're unclear, check with your Fiducial representative.

Magnetic Reporting. Be familiar with any appropriate federal and state magnetic media reporting requirements that must be met. Magnetic reporting tapes specifically apply to companies with more than 250 employees.

Order W-2 forms and/or obtain software for the upcoming tax season. You can also deduct this purchase for the current tax year if it is made before December 31, 2005.

Software updates. Review the W-2 processing section in your accounting software program or with your payroll service provider and upload any necessary updates, patches or new versions.

Take a class. Consider taking a refresher course in November or December to prepare you and your staff for questions that may arise.

'Fall is a great time to think about your business' accounting practices and to make any necessary system changes for the next fiscal year,' says David Prather, Fiducial's accounting and financial reporting product manager. 'Depending on your accounting cycle and year-end dates, you can take a little time to evaluate what is working, consider processes that can be improved and implement new software for the next accounting year.'

Consider carefully who will be completing the financials for the upcoming tax year. If last year's tax processing is still a vivid nightmare, you may want to start interviewing accountants or tax preparation companies now. Bear in mind, that a small business consultant can offer a wide range of services and skills that can provide much needed strategy and direction to a growing business. If you're confident that you can handle the payroll, W-2 preparation and tax filing for your organization, then it may behoove you to take a tax refresher course that can highlight changes to the 2005 tax code before you dig in.

For individual or jointly filed taxes, review your own payroll stub for federal, state and other deductions. You can often keep your money longer by estimating your tax payments. Examine the W-2 for any overpayments and make adjustments now while there's still nearly two full months left in the year. Why give the government your money tax-free when you could be placing it in a money market account and keeping the interest yourself? To estimate your payments, calculate 90% of the current year's total tax or 100% of your prior year's total tax (110% if you prior year's adjusted gross income was more than $150,000). Hit those targets and, no matter how much you owe next April 15, there won't be any interest or penalties if you make a timely payment of the balance.

If you'd like to learn more strategies for the upcoming 2006 tax preparation season, talk with a Fiducial representative today by calling 888-FIDUCIAL or visiting our web site at www.Fiducial.com.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transactions or matter addresses therein.

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This page last modified: 28 Mar 2008