Closing the Payroll Year

This section provides answers to some of the most common questions related to closing the payroll year.

I have received a software update, but haven't loaded it yet. How will this affect year end processing?

Please load the Year End (R3) version of Spectrum before performing year end processing. If you are not using the latest year-end version of Spectrum, please enter a case on the Viewpoint Customer Portal.

When do I close 2021 payroll?

Plan to perform the year end tasks any time after you complete your last payroll check cheque dated 2021 and before you issue any checks cheques dated 2022. Spectrum is date-sensitive and does not require you to do these steps on December 31st.

What does the Year End Update do? What effect does it have on my permanent payroll records in Spectrum?

The Year End Update resets all employees' year-to-date balances back to zero. The Year End Update also sets the accumulated balance in the recurring deduction file to zero if the Deduction/Add-on Code flag is set to clear at year end.

The Year End Update does not remove any history for employees.

May I start my first January payroll before printing W-2s?

Yes, right after finishing the last payroll for 2021 at year end, you will perform a W-2 Build on the W-2 Form Maintenance screen and review the totals. You will want to review the totals prior to the Year End Update step, as once the Year End Update is performed and the first payroll cycle is run, revising the previous year's information is much harder. The W-2 print does not have to be performed at this time.

What happens if my first 2022 payroll has a period end date in December 2021?

This is not a problem. W-2s must be produced on a strictly calendar-year basis (using check cheque date), so this cycle will be part of the 2021 totals regardless of the period end date.

If you have the Period-end date or Work date expense accrual options selected on the Payroll Installation Properties tab, then expenses for this cycle will be reflected in December.

I want to delete (purge) terminated employees. How do I do this?

An employee may be purged by using the Delete Employee from Current Company screen in Payroll > Utilities.

My fiscal year is different than the calendar year. Is there anything special I should know?

Because payroll is based on the calendar year, you will need to perform the Year End Update in the Payroll module, even if you maintain the rest of Spectrum on a fiscal year basis. Do not run the Payroll Year End Update again at the end of your fiscal year.

My fiscal Year End is December 31st. Is there anything special I should know?

Spectrum provides an unlimited Fiscal Calendar in the General Ledger module. To add new years or historical years to this calendar, see the General Ledger Help.

How do I go about reviewing the accuracy of the W-2 information?

It is best to review the information stored in each box on the W-2, beginning with your company name, address, and employer identification number and then working through each amount box after that. You should also check the totals page on the W-2 Listing, compare it to balanced payroll records, and then review the individual W-2s.

How do you recommend I balance payroll for W-2s?

There is no substitute for sound procedures throughout the year. In general, the basis for year end balancing should reflect the sum of accurate quarterly filings and routine reconciliation of liability accounts and bank statements.

  • Bank Statement reconciliation. The best method for detecting manual and void checks that have not been entered into the system is through the bank statement reconciliation, which should be completed through 12/31, prior to issuing W-2s.

  • Balance GL payroll. Verify that all General Ledger payroll liability account balances are reconciled through 12/31, prior to issuing W-2s. Use the Payroll > Reports > Liabilities Reconciliation report for this purpose.

  • For reconciling individual W-2 boxes:

Boxes 1-6: Reconciling boxes 1-6 on the W-2 should focus on matching the sum of the four Payroll > Reports > Quarterly Federal Tax Reports, sometimes referred to as the 941 Federal Quarterly Report, filed during the year. If a difference is found (beyond 'fractions'), reprint the Quarterly Federal Tax Report in Spectrum to determine whether changes may have occurred after the filing was made (backdated checks or voids). When attempting to locate a difference, the figures on the quarterly report should then be reconciled to the Tax History Report for the same date range. The source information for both the Build W-2 Forms and this history report is the employee state tax history file.

Boxes 9-14: Reconciling boxes 9-14 for dependent care benefits, 401(k), and other amounts is best done by printing the Deduction History and Add-on History Reports.

Boxes 15-20: Reconciling boxes 15-20 for state and local information is best done using the Wage and Tax History Report or the Subject-to-Tax Report.

We've instituted a Heath Savings Account (HSA) this year. How do we record this on the W-2?

Please see the Benefit Setup chapter in this help file for details on recording benefits in Spectrum. You would create a deduction for the employee portion, and an add-on for any employer contribution. Both the add-on and deduction codes are added to Box 12 during the W-2 Build.

How should companies report the total cost of employee Health Care Benefits?

Spectrum's W-2 Build can be set to net Add-on and Deduction codes. Simply select both in the setup for Box 12. See the Payroll Processing chapter in this help file for more information.

I cannot locate the "Totals Only" option. Where can I find this report?

The Listing option on the W-2 Form Maintenance screen provides a 'Totals only' option.

How do 401(k) and Cafeteria/Section 125 amounts show up on the W-2?

The 401(k) amounts deducted from employee earnings are shown in Box 12. "D" represents 401(k) amounts. You will also notice that the wages for Federal income tax are shown net of 401(k) deductions.

The rules for Cafeteria/Section 125 amounts vary depending on the type and amount of the deduction. Generally Section 125 amounts are not included in Federal wages. Some Section 125 benefits paid by employers must be reported on the W-2. Please see IRS publications covering Section 125 plans for more information and/or consult with a CPA on your specific company's obligation.

Wages subject to income tax at the state and local level may or may not be affected by Cafeteria/Section 125 or 401(k) amounts. Verify this with your CPA.

How do I show 'pension/retirement' on the W-2?

On the W-2 form, an "X" may be needed in the Retirement plan box (contained in box 13 of the W-2) for some or all of your employees.

During the Build W-2 Forms, this can be set automatically, by selecting Yes – check retirement on all W-2s or K – check only for 401k participants from among the options for the Retirement plan. The field can also be edited manually, on an employee-by-employee basis, in the W-2 Form Maintenance screen.

I want to manually add employees to the W-2 file so they will be included when I print and file W-2's on Spectrum. How do I do this?

The W-2 Form Maintenance screen is available for this purpose. Please see the Payroll Processing chapter in this help file for more information.

Our company works in multiple states. I see that the state wages total on the "totals" page of the W-2 Listing is larger than my total payroll. Is there something wrong?

Nothing is wrong. The total of all states' wages appear as one total. It is the sum of all of the state amounts. Review the recap cross tabs for individual state wage and tax totals below the summary total on the W-2 Listing.

One of my employees was recently married and changed her name. Should I set up a new employee code as part of year end?

Spectrum populates employees' names on W-2's T4 Slips based on Employee Main Properties. No additional changes are needed.

If a change in employee code is desired, Spectrum provides a convenient utility to change employee codes automatically. This update changes the Maintenance screens, as well as all of the history files for this individual. This procedure is not tied to year end in any way, and may be used as needed throughout the year.

To change employee codes automatically:
  1. On the Site Map, click Payroll > Utilities > Change Employee Code.
  2. Click New.
  3. In the Old employee code field, enter the employee's previous employee code, or use the drop-down to search and select an employee code.
  4. In the New employee code field, enter the employee's new employee code.
  5. Click OK.
  6. Print the Employee Code Change Listing to confirm the entries.
  7. Click the Update button.
    Note: It's important that no one is using Spectrum while this step is being performed - both to speed the process and ensure all records are updated properly.
  8. Read the text in the Code Change Window and click OK to proceed.
  9. On the Employee Code Change Update screen, select the Continue option and click OK.

Our company's 401K plan includes an employer matching program. How can Spectrum be used to track this?

There is a feature specifically designed to address this need.
  1. On the Site Map, click Payroll > Maintenance > Deduction/Add-on Code and set up a new add-on code.
    Note: If you select the Percent of related code option as your calculation method, you will be able to attach the 401(k) deduction code that you want to base the calculation on in the related code field.
  2. On the Add-ons tab, select the Print on paycheck checkbox. Do not set up tax effects or vendors. Spectrum will calculate the match based on the 401(k) amount deducted each pay cycle.

The Add-On History Report can be used to review these amounts at period end.

I'm trying to reconcile my Payroll liabilities in General Ledger, but there are no January beginning balances. What's wrong?

If December 31st is your fiscal year end, the G/L Opening Forward Balance Update has not yet been performed. This important update sets the beginning balances and retained earnings for the new year, and should be performed each time you post additional amounts into the prior year. The Equipment Control and Materials Management modules also have Opening Forward Balance Updates that should be run before year end and re-run each time you post additional amounts into the prior year.

If the Opening Forward Balance Update has been performed, verify the account type in the G/L master file for the Payroll Liabilities is set to Liability. If an incorrect account type is found, change the type to Liability, and then re-run the Opening Forward Balance Update to set the beginning balance.

Even though I have closed payroll and am now doing 2022 activity, I haven't closed other modules yet. Is that a problem?

CAUTION: Once Payroll has been closed at year end, do not attempt to record more prior-year activity in payroll. Doing so will corrupt the new year-to-date totals, and taxes will be incorrectly calculated. If prior year entries do need to be made, we've included a special troubleshooting section in this guide that addresses this problem.

For other modules, Spectrum date sensitivity allows you to continue to record prior year transactions for as long as needed. A/P invoices and other transactions show up for some time after the year end. As each module is closed, set the minimum processing date to the New Year and move on to the next module.

Are there any Year End steps I should plan to do for other Spectrum modules?

If the Human Resources module is installed, the Time Off Management screen can be used to revise vacation/holiday/sick account balances.

For information on Year End procedures in other modules, please refer to the Non-Payroll Processing chapter in this help file.

How do I increase the net distribution on cash earnings, such as a bonus, so that tax deductions will not be included in the distribution amount?

Gifts of cash, bonuses, and other cash equivalents can be considered wages for tax purposes, and the employer must withhold and pay all applicable taxes. There may be occasions when the employer wants to "pick up the tab" for the employee share of payroll taxes. The tax complication arises because the taxes that normally would be an employee liability are treated as additional income to that employee because the employer is paying them. The following formula is an example of how to calculate and record the amount of this payment:

Example:

You want to give Terry a Year End bonus of $1000. You will pay her portion of Federal income tax (assume 14%), FICA (7.65%) and State income tax (8%). The wages you will need to record and report are calculated as follows: Wage = $1000/(1 - applicable tax rate)

In this example it is (1-(.14+.0765+.08))=$1421.46

The gross pay of $1421.46 is then recorded in Payroll > Time Card Entry using one of the user-defined pay types of 1, 2, 3 or SA. Make certain that this pay type you have selected is set up with the correct tax effects in Tax Exclusion. Adjustments to the check can be made in Payroll > Check Adjustment Entry to generate the desired net amount.

What are the important dates I need to know for filing?

Please refer to the CRA website for filing deadlines for paper and electronic filing.