5 Tips to Avoid Year-End Tax Headaches

12.3.19 | Sometimes problems arise after you’ve run the final calculations and employees have received their W-2s. It’s frustrating and time consuming. Avoid the hassle and headaches by doing these 5 things:

1) Be sure you are using 1040 marital status and exemption numbers

When calculating gross-up at year end, you should not use W-4 marital status and exemption numbers. 1040 marital status and exemption numbers are what will be claimed on the actual 1040 Federal and state tax returns that will be filed by individuals early next year. W-4 data is typically shown in payroll systems for withholding purposes, but often don’t reflect the actual 1040 information. We recommend that accurate 1040 information be used for these calculations; if necessary, verify the data directly with employees.

2) Double check your gross-up settings

Certain states still allow an exclusion/deduction for moving expenses.  If you are accounting for this on your reports, be sure that your system is set up so that gross-up is not calculated for these expenses in the states allowing the exclusion/deduction.

3) Double check ALL switch settings in your relocation software

It is very easy for a setting to accidentally be changed by a user. Many settings can have a big effect on the final calculations.

4) Check for previous relocations

When you receive YTD earnings information from the payroll department to be used for year-end calculations, verify whether or not they include previously-reported relocations. This determines the system’s starting point for calculations and it needs to be accurate.

5) Make sure that expenses include the correct year

Weeks into the new year, many people still cite the previous year when completing expenses. It’s best to run an audit report and double check the expense dates.

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