Year-End Payroll Checklist for Texas Small Businesses (2025 Texas Guide)

As the year winds down, Texas small business owners face one of the most important responsibilities of the season: closing out payroll accurately and preparing for a clean start in the new year.

A smooth year-end ensures your employees receive correct W-2 forms, your TWC filings match your wage reports, and you avoid costly payroll corrections in Q1.

Whether you’re a new employer or have been operating for years, use this Texas-specific checklist to guide your year-end payroll process.

1. Confirm Employee Information (Especially Mailing Addresses)

Before processing year-end forms, verify each employee’s:

• Full legal name

• Social Security Number

• Current mailing address

• Email address

Even though many employees now receive pay electronically (direct deposit), that does not mean all workers use electronic W-2 delivery. The American Payroll Association (APA) found that nearly 96 % of employees receive their wages electronically. PR Newswire

Nevertheless — a significant portion of small-business workers still expect a paper W-2 mailed to their home address rather than relying on an online portal. If the address on file is outdated or incorrect, you risk W-2s being returned undelivered — which means disgruntled employees, delays in tax filing, and a flood of calls come tax-time.

Running a quick audit of current mailing addresses now helps you:

• Ensure W-2s get delivered on time

• Avoid reprints or corrections

• Prevent confusion and frustration for your team

• Help your employees receive their tax refunds promptly

2. Reconcile Year-to-Date Payroll

Run your YTD reports and review:

• Gross wages

• Federal withholding

• Social Security & Medicare

• Texas SUI wages

• Bonuses and reimbursements

Texas has no state income tax, so employers only handle TWC SUI (state unemployment insurance) at year-end.

3. Verify Texas SUI (TWC) Taxable Wages

Check that each employee’s SUI wages stop after the first $9,000 in earnings.

Common errors include:

• Over-reporting taxable wages

• Missing taxable wages

• Quarterly totals not matching annual totals

Your TWC wage reports should reconcile with all four quarters.

4. Process Year-End Bonuses

If you’re issuing year-end or holiday bonuses, confirm:

• Supplemental withholding

• PTO payouts

• Taxable fringe benefits

• Last reimbursements

Texas does not tax bonuses at the state level, but federal rules still apply.

5. Review Benefits & PTO

Check for:

• PTO carryover

• Year-end PTO payouts

• Correct benefits deductions

• Retirement plan adjustments

• Updated contribution limits

Clean benefit totals help ensure accurate W-2s and a smooth January.

6. Review Contractor Payments (1099-NEC)

For contractors paid $600 or more, begin preparing Form 1099-NEC.

Confirm you have:

• A current W-9

• Correct addresses

• Accurate totals

• EIN or SSN on file

If you're unsure about classification, apply the TWC 20-factor test.

7. Run Final Payroll for the Year

Verify:

• Final pay dates

• Overtime calculations

• Bonuses

• PTO payouts

• Final deductions

• Manual checks

Texas requires final paychecks within 6 days if an employee is terminated involuntarily.

8. Prepare W-2s, W-3, and 1099s

Key deadlines:

• January 31 – W-2s due to employees

• January 31 – W-2/W-3 due to SSA

• January 31 – 1099-NEC due

Starting early gives you time to fix errors before submission.

9. Update Payroll Settings for the New Year

Review and update:

• Pay schedules

• PTO policies

• Deduction amounts

• Benefits

• Holiday calendars

• New hire packets

A clean setup in January keeps payroll accurate all year.

BrightPath Pay & People Is Now Accepting New Clients for the New Year

Limited Availability

As Texas employers work through year-end tasks, BrightPath Pay & People is opening a limited number of client spots for the upcoming year. Our team is here to support you during this busy season and help ensure a clean, compliant start to 2026.

BrightPath provides:

• Texas-specific payroll processing

• TWC SUI compliance & quarterly filings

• Accurate federal and state tax calculations

• Full employee onboarding & new hire reporting

• Time-tracking and software integrations

• Year-end W-2 and 1099 preparation

• Local, responsive support from a founder-led team

  
  

Because we keep our client list intentionally small, every new business receives personalized onboarding and hands-on support.

If you want help closing out the year cleanly — or you're ready to begin the new year with a reliable, Texas-focused payroll partner — now is the perfect time to join our interest list.

👉 Learn more or request early access: info@TexasPayroll.com