Closing the Payroll Year
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.
When should I close 2023 payroll?
Plan to perform the year-end tasks any time after you complete your last payroll check dated 2023 and before you issue any checks dated 2024. Spectrum does not require you to do these steps on December 31st.
What does the Year End Update function do? What effect does it have on my permanent payroll records in Spectrum?
The Year End Update resets all employees' year-to-date balances to zero.
If the Deduction/Add-on Code flag is set to clear at year-end, the Year End Update also sets the accumulated balance in the recurring deduction file to zero.
The Year End Update does not remove any historical employee data.
May I start my first January payroll before printing W-2s?
Yes, but take the standard precautions.
After finishing the last payroll for 2023, go to the W-2 Form Maintenance screen and perform a W-2 Build, and review the totals. Do this prior to the Year End Update step. The W-2 print does not have to be performed at this time.
Once the Year End Update is performed and the first payroll cycle is run, revising the previous year's information is much harder.
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.
What happens if my first 2024 payroll has a period end date in December 2023?
This is not a problem. W-2s must be produced on a strictly calendar-year basis (using check date), so this cycle will be part of the 2024 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 .
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. Run the Payroll Year End Update only at the end of each calendar year, and not timed with the end of your fiscal year.
My fiscal year-end is December 31st. Is there anything special I should know?
Your Spectrum application 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 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 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 , 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?
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 when Spectrum builds the the W-2.
Please see the Benefit Setup section in this help file for details on recording benefits in Spectrum.
How should our company 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 Payroll Year-end Processing 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-2s in Spectrum. How do I do this?
The W-2 Form Maintenance screen is available for this purpose. See Payroll Year-end Processing.
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?
It's not necessarily 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 changed their name during the year. Should I set up a new employee code as part of year-end?
No. Spectrum populates the employee's names on the W-2 based on the field values in Employee Main Properties. No additional year-end-related changes are needed.
- Go to .
- Select New.
- 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.
- In the New employee code field, enter the employee's new employee code.
- Select OK.
- Print the Employee Code Change Listing to confirm the entries.
- Select Update.
- Read the text in the Code Change Window and select OK to proceed.
- On the Employee Code Change Update screen, select the Continue option and select OK.
This update changes the Maintenance screens, as well as all of the history files for this individual.
Our company's 401K plan includes an employer matching program. How can Spectrum be used to track this?
- Go to 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 the related code field.
- On the Add-ons tab, select the Print on paycheck checkbox. Do not set up tax effects or vendors. Spectrum calculates 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, it means 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 2024 activity, I haven't closed other modules yet. Is that a problem?
For the other modules, you can continue to record prior year transactions for as long as you need. It's common for A/P invoices and other transactions to show up for some time after the year has ended. As each module is closed, set the minimum processing date to fall in the new year and move on to the next module.
Are there any year-end steps I should plan to do for other modules?
If the Human Resources module is installed, use the Time Off Management screen to revise vacation/holiday/sick account balances.
For information on year-end procedures in other modules, please see Non-Payroll Year-end Processing.
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 remit all applicable taxes. On occasions when the employer wants to cover the employee share of payroll taxes, the taxes that normally would be an employee liability are treated as additional income to that employee because the employer is paying them.
Example:
You want to award a year-end bonus of $1000. You will pay the employee 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 = $1,000/(1 - sum of applicable tax rates)
In this example it is $1,000/(1-(0.14 + 0.0765 + 0.08))=$1,421.46
The gross pay of $1,421.46 is then recorded in 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 to generate the desired net amount.
