Both individuals and businesses have traditionally used the end of a year to take stock of what went right and what went wrong. They use this information to begin planning for the new year even before it officially arrives. One simple way to start the process is to focus on any changes your company must make with payroll as we end 2020 and enter 2021.
Payroll and Holidays at the End of the Year
Between Christmas Eve, which may or may not be a paid holiday, and Christmas Day and New Year’s Day that most companies pay as holidays, you will likely need to straighten out at least a few issues before you send your employees home from work for several days. The first thing to find out is what day of the week the winter holidays fall on and whether the people will celebrate the legal holiday the same way.
For example, Christmas Day and New Year’s Day are both on Fridays this year. That means many offices will close early on Christmas Eve or New Year’s Eve and remain closed throughout the weekend.
Employees love to receive holiday bonuses, but just make sure to announce the bonuses ahead of time and to let people know that the Internal Revenue Service (IRS) taxes bonus checks at a rate much higher than regular payroll checks. Some employees will have the opportunity to get most of the taxes from their bonus check back when they file their tax return early next year.
If you plan to pay employees early with money they normally wouldn’t receive until January 2021, make sure to let them know since it could affect their tax returns as well as your own. This can be an advantageous strategy because it allows your company to write off payroll expenses for this year that you wouldn’t normally pay yet.
Could You Be Contributing More to Your Own Retirement?
If 2020 taught us anything, it’s that life is extremely unpredictable despite our best planning. Whoever expected to have the government shut down their business – even temporarily – because of a pandemic no one had heard of yet a year ago?. Whether it’s contributing more to your 401(k) or IRA or doing the same for your employees, investing money back into yourself and those who work for you is an excellent idea. Keep in mind that you have until April 15, 2021 to make retirement contributions for calendar year 2020.
Prepare Year End Financial Documents
Preparing and reviewing financial documents such as an income statement, cash flow, budget, working capital, and more helps you to see your business exactly as it is, not how you would like it to be. The statements show you in black and white what you have spent this year, where you could cut back, and which products and services bring in the greatest revenue. Using these documents as a guide, see how much better you can do next year.
This information barely scratches the surface on how to have a productive year end. Did you know this is also a great time of year to switch payroll providers or hire one for the first time? We would love to tell you more about Palmetto Payroll’s services during a personal consultation.