As the new year begins I thought it might be helpful to keep the following procedures in mind when preparing your W2s and W3.

• Form W-3 is the total of all Forms W-2.
• The sum of line 2 for the four quarters on Form 941 should balance to the amount appearing in Box 1 of Form W-3.
• The sum of line 5a for the four quarters on Form 941 should balance to the amount appearing in Box 3 of Form W-3.
• The sum of line 5c for the four quarters on Form 941 should balance to the amount appearing in Box 5 of Form W-3.
• Test reasonableness of Social Security wages and withholdings (multiply Box 3 from Form W-3 less excess wages by 4.2%).
• Test reasonableness of Medicare wages and withholdings (multiply Box 5 from Form W-3 by 1.45%).

Additional year end payroll considerations.

• Verify all taxable benefits are included in Forms W-2.
• Compare individual employee amounts from the payroll register totals to Forms W-2.
• Box 14 of Form W-2 may be used to report contributions to Section 125 (Cafeteria) Plan for childcare and medical care.
• Check for excess contributions to qualified plans (401(k), SIMPLE, etc.).
• Calculate value of any personal use of company vehicles and add to wages only in Box 1 of Form W-2 and in line 2 of Form 941.
• For S-Corporations, health insurance paid by the corporation for a 2% or more shareholders is included only in Box 1 and 16 of Form W-2.

The employee name on all payroll reports should match what appears on the employee’s Social Security card.  If you are unsure of a number or want to verify that you have correct numbers you can go to http://www.ssa.gov/bso/bsowelcome.htm and register with SSNVS.

Before running your 1st payroll in 2013

Prepare a final 2012 backup of your software and put in a safe place.

• Remind employees they need to file a new W-4 by handing out new W-4s with final payroll of 2012.
• Verify that employee requests for fringe benefit deduction changes for the new year have been applied.
• Change withholding tables and social security limitations in your software either manually or through the update provided by your software company.
• Verify your 2013 state unemployment rate and make necessary changes.  For 2013 in the state of Colorado, the subject wages is increased to $11,000.00.