Now is the time to wrap up 2018 payroll and get a jumpstart on good processing habits for 2019. And that means starting in January to attend to year-round payroll tasks rather than waiting until fall to put ducks in a row. That’s an especially smart idea now that the Internal Revenue Service (IRS) is scrutinizing year-end compliance. Plus, pending tax legislation has the potential to alter your responsibilities.
A handful of sound payroll practices can transition your accounting from an end-of-the year crunch to smooth and compliant start-of-the-year processing, says human resources and payroll expert Vicki Lambert in her AudioSolutionz webinar, “Preparing for Year-End 2018 & Early 2019 Payroll.” Lambert outlines how to take control of payroll and explains what new IRS, Social Security Administration, and Department of Labor changes you need to contend with in 2019.
2019 Payroll Changes: Meet the New W-4
In June, the IRS released a draft of its Form W-4 for employee withholding, introducing several changes you need to know about, says payroll consultants ADP. These revisions include 4 new lines:
- Line 5: “Total number of allowances you are claiming” is gone. Employees will be encouraged, though not required, to complete a new W-4 for 2019. You can use the 2018 form for those who don’t.
- The new line 5 asks for employees to enter estimated non-wage income not subject to withholding, such as interest and dividends.
- A third IRS withholding calculation was added for “head of household”—that’s in addition to “single” and “married filing jointly.”
- A new line 6 asks employees to enter estimated subtractions to income based on expected deductions such as state and local taxes, mortgage interest, and charitable contributions.
- A new line 7 asks employees to enter the full-year amount of any tax credits they expect to quality for.
- A new line 8 asks employees to enter full-year income from any second job.
Here’s why that new W-4 should be filed, adds ADP: “Unless an employee has already ﬁled a new Form W-4 in 2018, tax withholding calculated for 2018 payrolls could be based on outdated withholding allowances.”
8 Tips for Proactive Payroll Processing
Ready to gain efficiency and put an end to that end-of-the-year panic? Now is the time to plan out the payroll processing strategies that will help you in the long run.
- Set a clear payroll policy to outline how employees are paid—including commission, reimbursements, sick days, and more.
- Create a payroll budget—it may help you identify over- or under-staffed areas.
- Classify your workers.
- Establish a consistent payment schedule.
- Go paperless and push direct deposits and tax e-filing.
- Move to digital and web-based processes for tracking employee clock-ins and attendance.
- Keep track of important dates, such as payroll tax reports, unemployment, social security taxes, and income tax withholding.
- Switch from manual-update entering to mass-automatic updating.
These are just starting points, says Vicki Lambert, who is hosting the AudioSolutionz webinar on 2019 payroll changes. It’s no small job, but proactive work at the beginning of the year can save you a mad scramble at the end.