Preparing for 2025 Year-End: Key Considerations for Accurate W-2 Reporting

As 2025 draws to a close, W-2 reporting is once again a focal point for employers. While the form itself may feel routine, year-end payroll reporting often reflects a full year of decisions, system changes, and workforce shifts. Addressing W-2 preparation early can help reduce last-minute corrections and avoid employee frustration once forms are issued.

Below are several areas employers may want to review as part of their 2025 year-end process.

Reviewing Payroll Data and Employee Records

Accurate W-2s begin with clean payroll data. Before year-end processing ramps up, employers should confirm that employee names, Social Security numbers, and addresses align with Social Security Administration records. Even small discrepancies can result in rejected filings or employee questions in January.

This is also a good time to review wage classifications. Changes in compensation, bonuses, commissions, or severance payments throughout the year can affect how amounts are reported. Employers with tipped employees or multiple pay types may want to double-check that all taxable wages have been captured consistently.

Benefits, Deductions, and Fringe Items

Benefits often drive W-2 reporting complexity. Items such as group-term life insurance, personal use of company vehicles, taxable wellness benefits, and certain relocation expenses may require inclusion in taxable wages. For 2025, employers should confirm that these amounts were tracked throughout the year and are reported and taxed correctly through payroll and on the employees’ Form W-2s.

Additional reporting requirements for more than 2% shareholders in S-Corporations also need to be considered.  Benefits paid or reimbursed by the S-Corporation to the more than 2% shareholders need to be reported on their Form W-2, Boxes 1 & 16.  Benefits that are included in this reporting requirement are health insurance premiums, dental, vision, and accident premiums, employer paid HSA contributions, group-term life insurance premiums, Medicare premiums reimbursed for S-Corporation owners, and long-term care premiums.  Premiums can be in the name of the individual shareholder and may include premiums paid for spouse/family so long as those premiums were not paid under another employer’s group plan.

Health coverage reporting under Box 12 and retirement plan participation indicators also deserve attention. Changes in benefit offerings, midyear enrollment shifts, or plan mergers can introduce reporting issues if not reconciled before forms are prepared.

State and Local Reporting Considerations

Employers with multi-state or remote workforces may face added reporting layers. State and local withholding rules can vary, particularly when employees relocate or work across jurisdictions during the year. Reviewing work location data and state tax withholding records now can help reduce amended W-2s later.

Some localities also require separate wage reporting or special codes. Confirming these requirements ahead of time can help payroll teams stay on schedule.

Planning for Timely Filing and Distribution

W-2s must be furnished to employees and filed with the Social Security Administration by the end of January. Meeting that deadline depends on coordinated effort between payroll providers, HR teams, and finance leadership. Establishing internal cutoffs for final payroll adjustments and benefit true-ups can keep the process moving smoothly.

W-2 reporting is often viewed as a compliance task, but it also reflects the quality of payroll and benefit administration throughout the year. Taking time now to review data, confirm assumptions, and address gaps can ease the year-end rush.

If questions arise as you prepare for 2025 W-2 reporting, connecting with your Brady Martz payroll team can help clarify issues and identify areas that may warrant closer review before forms are finalized.

Sources:

Baldwin CPAs. (2022, October 25). W2 reporting preparation: Impactful W2 items you should know. Baldwin CPAs. https://www.baldwincpas.com/insights/impactful-w2-items

baldwincpas.com

Simeone, M. (2024, December 3). 2025 W-2 reporting: Essential year-end tax compliance guide for employers. HR 2 People, LLC. https://hr2people.org/2025-w2-reporting/

Disclaimer:

This article is for general informational purposes only and is not legal or compliance advice. Situations can differ, and requirements may evolve as additional guidance is released. For support specific to your organization, please contact the qualified professionals at Brady Martz.

Elements of this article were generated with the assistance of AI-enabled drafting tools. The final version has been carefully reviewed by Brady Martz professionals to ensure it reflects our standards of quality and accuracy.