By TK Partners — Certified Public Accounting firm with offices in Walla Walla and Moses Lake, Washington, serving clients in the American Northwest and across the United States.
That email from your payroll provider lands right as the holiday rush begins and the year winds down. It says something like “year-end changes must be submitted by December 5,” and it is easy to file under later. Please don’t. The deadline is not there to make your life harder. It is there so your W-2s and 1099s come out right the first time, which means no corrections, no amended returns, and no January phone calls asking why your health insurance is on the wrong line.
This post walks through why the cutoff exists and the four items business owners miss most often. It ends with a checklist you can hand to whoever runs payroll.
Why the deadline falls in early December
Payroll providers don’t just cut checks. They also prepare your W-2s, your 1099-NECs, and your fourth-quarter and annual filings. Employee W-2s are due by January 31, and so are 1099-NECs for contractors. Providers serve thousands of employers who all want changes at once, so they set an internal cutoff weeks ahead.
After that cutoff, your last few paychecks of the year are already running through a locked process. A change submitted on December 22 may not reach the final payroll. It may need a manual adjustment, or it may only be fixable after the year closes, through a corrected W-2c. The IRS charges penalties for incorrect information returns, and they grow the longer a mistake sits. Fixing a problem before the books close is almost always cheaper and calmer than fixing it afterward.
If your provider’s notice names a date, treat it as your real deadline. Your CPA’s review should happen a few days before it, not after.
Bonuses and year-end pay: the pay date decides the tax year
For employees, a bonus belongs to the year it is paid, not the year it was earned. Picture a team of 12 who each earn a $1,500 year-end bonus, $18,000 in total. If that money goes out December 20, it lands on this year’s W-2s. If it slips to January 3, it lands on next year’s, and your employees’ tax picture changes with it.
Three details are worth confirming before the cutoff:
- Withholding method. Bonuses are supplemental wages. Many employers withhold a flat 22 percent federal rate on them, but your provider needs to know which method you want.
- Who is included. Part-time staff, seasonal workers, and anyone who left mid-season are easy to forget.
- Owner pay. If you are an S-corp owner, a year-end bonus to yourself interacts with your reasonable salary and your distributions. That is a planning conversation, not a last-minute payroll tweak.
S-corp owner health insurance belongs on your W-2
This is the item we see missed most. If your business is an S corporation and you own more than 2 percent of it, the IRS treats you as a “2% shareholder.” Health insurance premiums the company pays for you must be included in your W-2 wages (Box 1). They are generally not subject to Social Security and Medicare tax, so Boxes 3 and 5 stay unchanged.
Here is what that looks like with real numbers. Say you pay yourself a $60,000 salary and the business covers $1,800 a month in health premiums, or $21,600 for the year. Your Box 1 should show $81,600, while Boxes 3 and 5 still show $60,000. If payroll never hears about the premiums, Box 1 reads $60,000 and your personal return has nothing to support the self-employed health insurance deduction. That deduction is the reason for the whole exercise.
The fix is simple if it happens before the cutoff. Send your provider the year-to-date premium total and the monthly amount through December. Also confirm the company, not you personally, is paying or reimbursing the premiums. If you pay out of pocket with no reimbursement through the business, the setup doesn’t work the way people assume. A short call with your CPA in November clears that up.
Spouses, children, and other family members on the payroll bring their own wrinkles. Mention them.
Company vehicle use is a taxable fringe benefit
Owners and managers drive a lot: client visits, supplier pickups, a trade show, a trip to the bank. When the business owns or leases the vehicle and someone also uses it personally, the personal portion is a taxable fringe benefit. That includes commuting. It must be added to that person’s wages, and IRS Publication 15-B explains the valuation methods.
The math is not scary, but it needs a record. If your vehicle qualifies for the cents-per-mile method, the 2025 IRS rate is 70 cents per mile. Say your general manager drove 3,000 personal miles in the company truck. That adds $2,100 to taxable wages. Without a mileage log, you are guessing, and the IRS tends to assume the personal share is higher than you would.
To get it right, pull your odometer readings and your log by the first week of December and send the personal-use total to payroll.
Employee data, contractors, and employee perks
A W-2 is only as good as the data behind it. Names that don’t match Social Security records, old mailing addresses, and missing Social Security numbers are the most common reasons returns bounce back or W-2s never reach the employee. Seasonal staff are the biggest risk. Someone who worked three weeks of seasonal help in October may have moved twice since.
Before the cutoff, confirm:
- Legal names and Social Security numbers for everyone paid this year, including seasonal workers.
- Current mailing addresses, and whether each person has agreed to electronic W-2 delivery.
- A signed W-9 for every contractor, such as a cleaning crew, a freelance bookkeeper, or a graphic designer, before you issue 1099-NECs.
- Employee tips, including card tips paid out through payroll, so reported tips match what lands on the W-2.
- Any employee perks, such as discounts on your own products or free goods. Employee discounts are excludable only within IRS limits, and free items beyond those limits may be taxable wages. Check Publication 15-B or ask us.
Washington has no state income tax, but your quarterly state filings still depend on correct wages and hours. Errors in year-end data can ripple into those reports too.
A year-end payroll checklist for business owners
| Item | What to send payroll | Why it matters |
|---|---|---|
| Bonuses | Amounts, recipients, pay date, withholding method | The pay date decides the tax year |
| S-corp owner health insurance | Year-to-date and December premium totals | Puts the premiums in Box 1 so the deduction is supported |
| Company vehicle | Personal-use miles or value per driver | Adds the taxable fringe benefit to wages |
| Employee perks | Value and who received them | Prevents unreported taxable wages |
| Employee records | Names, SSNs, addresses, e-delivery consent | Avoids returned W-2s and mismatches |
| Contractors | W-9s and total paid | Needed to file 1099-NECs by January 31 |
| Final payroll date | Confirmation of the last run before December 31 | Keeps pay in the intended year |
The IRS also keeps plain-language pages on employment taxes and Form W-2 if you want to see how the boxes fit together.
What a CPA review adds before the cutoff
Payroll software processes what you tell it. It can’t tell you that your owner health insurance is missing, or that a bonus should wait until January. A short review a week before your provider’s deadline catches those gaps while they are still cheap to fix.
Our clients on a fixed monthly fee for bookkeeping and payroll support get year-round advisory help, so this check is part of the rhythm and not an extra bill. Documents move through our secure digital process, so you are not emailing Social Security numbers or premium statements.
Common Questions
What happens if I miss my payroll provider’s year-end deadline?
Your change may not reach the final payroll, so the error shows up on W-2s or 1099s. You would then file a corrected W-2c or amended return in January or later. Corrections cost time, and penalties for incorrect information returns increase the longer they stay uncorrected.
Do S-corp owners really have to put health insurance on the W-2?
Yes, if you own more than 2 percent. The premiums the company pays are reported in Box 1 wages, generally without Social Security and Medicare tax. That reporting is what supports your self-employed health insurance deduction on your personal return. Leaving it off can cost you the deduction.
Is using the winery truck to commute taxable?
Yes. Commuting and other personal use of a company vehicle count as a taxable fringe benefit. The value, often figured per mile, is added to wages. Keep a mileage log through December and send payroll the personal-use total before the provider’s cutoff.
Get your year-end payroll changes in early
If your provider’s deadline notice is sitting in your inbox, send us the details now: bonuses, owner health premiums, vehicle miles, and any employee changes. We will review them with you and help you submit clean numbers before the cutoff. Contact TK Partners to set up a quick year-end payroll review.
FAQs
What happens if I miss my payroll provider’s year-end deadline? Your change may not reach the final payroll, so the error shows up on W-2s or 1099s. You would then file a corrected W-2c or amended return in January or later. Corrections cost time, and penalties for incorrect information returns increase the longer they stay uncorrected.
Do S-corp owners really have to put health insurance on the W-2? Yes, if you own more than 2 percent. The premiums the company pays are reported in Box 1 wages, generally without Social Security and Medicare tax. That reporting is what supports your self-employed health insurance deduction on your personal return. Leaving it off can cost you the deduction.
Is using the company truck to commute taxable? Yes. Commuting and other personal use of a company vehicle count as a taxable fringe benefit. The value, often figured per mile, is added to wages. Keep a mileage log through December and send payroll the personal-use total before the provider’s cutoff.