# 9 Year-End Payroll Mistakes to Avoid

> Software helps prevent payroll errors before tax season.
- Title: 9 Year-End Payroll Mistakes to Avoid · PCMAG | Shortify
- Summary: Software helps prevent payroll errors before tax season. Businesses can avoid IRS penalties and unhappy employees by fixing payroll mistakes before year-end…
- Keywords: payroll, w-2, 1099, irs, tax, software, year-end, employee, compliance, technology, Mistakes, Avoid
- Source: PCMAG — https://pcmag.com/explainers/9-year-end-payroll-mistakes-to-avoid-and-how-software-can-help
- Author: Kathy Yakal
- Published: 2026-09-24T15:56:33+00:00
- Read time: 1 min
- Topics: payroll, w-2, 1099, irs, tax, software, year-end, employee, compliance, technology
## 1. Waiting Until Final Pay Run to Gather Records
You shouldn't wait until December's last payroll to start year-end tasks.
## 2. Failing to Verify Employee Data Before Filing
Accurate employee records prevent tax penalties and unhappy workers.
## 3. Misclassifying Employees as Independent Contractors
IRS scrutinizes companies to ensure contractors aren't really employees.
## 4. Overlooking Duplicate Payments and Calculation Errors
Check for duplicates, missing benefits, and tax errors before filing.
## 5. Postponing Account Reconciliation Until Year-End
Quarterly account reconciliation prevents payroll errors during year-end.
## 6. Forgetting Taxable Fringe Benefits and Extra Compensation
Bonuses, car use, and education assistance may be taxable.
## 7. Burying Manual Adjustments Without an Audit Trail
Document corrections to avoid confusion when closing out year-end payroll.
## 8. Neglecting Unused PTO and Accrual Payouts
Unused PTO hours may need to be paid out if your state allows it.
## 9. Generating Form W-2s and 1099s Prematurely
Wait until January 31 to create W-2 and 1099 forms for tax season.
## Why Modern Payroll Software Helps
Software centralizes payroll data and provides reports to prevent errors.
## Final Year-End Task
Generate W-2 and 1099 forms after triple-checking payroll data.
## IRS Compliance
Avoid IRS penalties by ensuring accurate W-2 and 1099 forms.
## Software Benefits
Payroll software helps with year-end tasks and reduces errors.
## Key Year-End Steps
Check records, verify data, and generate forms by January 31.
## Tax Season Readiness
Proper payroll setup ensures smooth tax filing and avoids penalties.
## Key takeaway

Businesses can avoid IRS penalties and unhappy employees by fixing payroll mistakes before year-end using software.