Preparing W-2s – Part 1: Before Running Final Payroll

As summer fades and the leaves begin to change, it’s the perfect time to start preparing for the calendar year-end. Taking a few proactive steps now can help ensure your W-2s are accurate and that year-to-date deductions align with IRS limits.

Review 403(b) Contributions

Verify that no employee is projected to exceed the annual 403(b) limits. For 2025, the standard limit is $23,500, with potential catch-up contributions available depending on your plan. Run a deduction report to flag employees nearing or exceeding the maximum and adjust payroll deductions as needed. It’s much easier to correct now than after the final payroll!

Check Flex, HSA & Dependent Care Limits These deductions also have annual caps:

• Medical Flex: $3,300 per spouse

• Dependent Care: $5,000 per household

• HSA: $4,300 individual / $8,550 family, plus a $1,000 catch-up for age 55+

A quick review of contributions ensures no surprise overages late in the year.

Some payroll systems—like Vista Iowa—allow you to set maximum deduction limits that prevent employees from exceeding thresholds. Even if those guardrails exist, an early review gives you time to notify employees or make updates without interrupting payroll processing. If your system doesn’t offer automatic limits, this check becomes even more essential to avoid time-consuming corrections later.

Encourage Electronic W-2 Delivery

Now is also a great time to remind employees to opt into electronic W-2s. Fewer printed forms mean less folding, stuffing, and mailing for your team. While you’re at it, ask staff to confirm their name, address, and Social Security number to prevent avoidable year-end errors.

One Big Beautiful Bill and Overtime

We know that there are a lot of questions regarding overtime reporting for employees.  We continue to monitor IRS notices regarding this issue.  At this time it doesn’t appear that overtime will be reported on W2s but you will need to provide some record of overtime to employees.  You should continue to look for guidance on this issue. 

Preparing W2’s is a very important annual task but by taking a few moments now to review, you can make them a breeze when the time comes to send them out!