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Year-end construction payroll processing is a critical task that requires careful attention and timely completion.

For construction companies, the complexities of construction payroll can make year-end processing particularly challenging if not handled correctly.

A study conducted by QuickBooks® found that more than 34% of construction companies still complete payroll through manual spreadsheets instead of using payroll systems.

This can lead to inaccurate calculations and errors on payroll reports, which can subject your business to costly penalties from government bodies.

However, by understanding the key steps involved in year-end payroll processing and leveraging the benefits of construction-specific payroll services, companies can streamline this process, minimize errors, and ensure compliance with construction payroll regulations.

We’re here to provide a comprehensive overview of the essential aspects of year-end construction payroll processing to guarantee you have a smooth process this year.

Key Takeaways for Construction Contractors:

• Year-end construction payroll processing is a critical task that must be completed accurately and on time. It involves finalizing payroll records for the year, including preparing W-2s and 1099 forms, filing payroll tax returns, and ensuring compliance with tax laws and labor laws.
• The year-end payroll process typically includes W-2 form preparation, 1099-NEC form preparation, payroll tax filing, and creating payroll year-end reports.
• Contractors need to consider several factors in preparation for year-end payroll processing, including gathering all necessary documents and reviewing payroll records for accuracy and consistency.
• A construction-specific payroll service can provide significant payroll benefits and streamline the year-end payroll process for business owners by certifying compliance with prevailing wage laws, certified payroll reporting and union contracts, handling payroll tax calculations, and filing and assisting with year-end payroll reporting.

What is Year-End Construction Payroll Processing?

Year-End construction payroll processing refers to the tasks and procedures involved in finalizing a construction company's payroll records for the year.

Year-end construction payroll processing is a critical task that must be completed accurately and on time to avoid legal penalties.

What Does Year-End Construction Payroll Processing Entail?

Completing year-end payroll processing is often a complex process, especially for larger construction businesses with multiple projects and employees.

By following these steps and considering these factors, contractors can ensure a smooth and accurate payroll process.

Step #1: Gather Necessary Documents

Gather all accurate employee timecards, as these are essential for calculating hours worked and wages.

Then, collect all previous payroll records, including wage rates, deductions, and tax withholdings. This will make it easier to produce year-end documents like W-4s and 1099-NEC for construction workers.

You can then prepare W-4 and 1099-NEC forms. W-4 forms determine the amount of federal income tax withheld from employees' paychecks.

1099-NEC forms report the total amount paid to independent contractors who earned more than $600 during the year.

Step #2: Review Payroll Records

Next, ensure that all collected payroll records are accurate and up to date. This includes verifying that wage rates, deductions, and tax withholdings are applied consistently throughout the year.

Using this information, you can then create accurate reporting that summarizes the company's payroll activities for the year, such as total wages paid, taxes withheld, and employee turnover, which are crucial for preparing year-end financial statements.

Step #3: Calculate Year-End Totals

This requires a total for:

• Wages paid to employees and independent contractors
• Amount of federal, state, and local income taxes withheld
• Social Security
• Medicare
• Unemployment taxes

Step #4: Prepare W-2 and 1099 Forms

With accurate totals, you can then prepare W-2 forms for construction workers who worked for the company during the year.

These forms report the employee's wages and federal, state, and local income tax withholdings.

Step #5: File Payroll Tax Returns

Then, you must prepare and file the necessary federal, state, and local construction payroll tax forms. This includes forms like Form 941 for federal employment taxes and state-specific payroll tax forms.

This form reports the total wages paid and taxes withheld during the year.

Remember to monitor year-end construction payroll deadlines regularly to ensure all returns are filed appropriately. This will help you avoid penalties and raises in interest rates.

Step #6: Ensure Compliance with Payroll Laws

To certify construction payroll compliance, be sure to review all applicable federal, state, and local payroll laws and government guidelines.

This includes all laws related to minimum wage, overtime, and worker's compensation.

Confirm that all employees are paid at least the minimum wage and that those who work more than 40 hours in a workweek are paid overtime.

You also must verify that all employees are covered by workers' compensation insurance.

The U.S. Department of Labor heavily monitors these laws, so all calculations must be accurate.

Step #7: Plan Ahead

Early preparation is crucial for a smooth year-end payroll process. Once you finish up for this year, begin planning well in advance for next year to avoid last-minute stress and potential errors.

Creating a detailed timeline outlining key tasks, deadlines, and responsible parties can help simplify the process.

This will also help you stay organized, allocate resources efficiently, and ensure that all steps are completed on time.

Or you can outsource your payroll to a construction-specific payroll service to completely streamline your year-end processes.

How Does a Construction-Specific Payroll Service Help?

A construction-specific payroll service can significantly streamline the year-end payroll process for construction companies by providing a comprehensive payroll platform.

These services are designed to handle the unique challenges and complexities of the construction industry, such as:

• Prevailing Wage Compliance: These services can help ensure that construction companies are complying with the Davis-Bacon Act and paying their employees the correct prevailing wage rates for their specific location and project.
• Certified Payroll Reporting: They can assist in preparing and submitting certified payroll reports, which are often legal requirements for public projects.
• Union Tracking: Construction-specific payroll services can help companies navigate the complexities of union payroll and ensure compliance with all relevant labor laws.
• Payroll Tax Calculations and Filing: These services can handle the calculation and filing of federal, state, and local payroll taxes, reducing the risk of errors and penalties.
  • If your construction company files quarterly, monthly, weekly, or biweekly, the service can adjust to your schedule and complete the process for you.
• Year-End Payroll Reports: They can assist with the year-end payroll process, including the preparation of W-2 and 1099 forms and the filing of payroll tax returns.
• Track ACA Requirements: Payroll services can complete ACA filing for you with official 1094-C and 1095-C forms printed and mailed straight to employees.

Construction payroll outsourcing to a payroll service can generate automatic timecards, simplifying many of the tasks involved in year-end payroll requirements and freeing up time for other important tasks.

They will also help ensure that employee payroll records are accurate and complete, reducing the risk of errors and penalties. The service will also print and mail taxes for your company, adhering to deadlines on your behalf.

This can help companies stay compliant with all applicable labor laws and regulations and improve their overall efficiency and productivity.

See How Payroll4Construction Can Simplify Your Year-End Processes

A well-executed year-end payroll process contributes to a company's overall financial health and success. By investing time and effort into this critical task, construction companies can lay a strong foundation for the upcoming year.

Maintaining accurate records, completing tax filings on time, and ensuring compliance with labor laws are essential for avoiding potential penalties, maintaining a positive financial standing, and facilitating accurate financial reporting.

Remember that early planning and preparation are key to a stress-free year-end. By starting well in advance and utilizing available resources, companies can ensure successful year-end construction payroll processing.

Using a construction-specific payroll service can simplify the process of processing year-end payroll greatly for construction companies. A service like Payroll4Construction offers automatic tax filings and payroll calculations and can help you maintain compliance with prevailing wage, certified payroll, overtime, and union tracking.

Our payroll team also offers integrations with other software and services, free payroll reporting options, and so much more! As the leading payroll provider, we can help minimize human error and make sure the year-end close process is done correctly and keeps your business compliant.

Chat with a specialist today to see how we can help you with your year-end construction payroll processing!