As the year winds down, year-end tax prep for staffing agencies becomes one of the most important operational responsibilities.
Additional Reports That Help Prepare for Year-End
Employee Data Cleanup Reports
First, it helps to review a few key reports before running the main year-end tax reports. These early checks make sure your employee information and wage details are correct before totals are finalized for the year.
The Employee Master List is the best place to start. You can find it under Reports → Employee → Roster. This report gives you a clear view of each worker’s profile. It shows addresses, tax locations, active or inactive status, and any missing fields. Fixing these issues now helps prevent returned W-2s and questions from employees when tax season begins.
In addition, many staffing agencies run a year-to-date Payroll Register before starting their official year-end work. This report is located at Reports → Payroll → Payroll Register. It confirms that earnings, deductions, benefits, and taxable categories were set up correctly throughout the year. As a result, you can catch any pay code changes or manual entries that might cause W-2 totals to be off later.
Payroll and GL Accuracy Checks
Then, it is helpful to check your State Unemployment Wage Report next. This report appears under Reports → Payroll → State Quarter Report. It shows SUTA wages for each employee and helps confirm that wages were assigned to the correct state and that no one exceeded the state wage limit too early. Correcting these issues now can prevent state notices and adjustments after filings are submitted.
Afterward, many agencies benefit from running the GL Reports. You can find it at GL → GL Reports. These Reports/Grids show how payroll and billing entries will map to your accounting system. Reviewing it before year-end prevents mismatches between your COATS Reports and the financial statements your accountant prepares.
Once these data cleanup reports are complete, you can begin running the four primary reports used for year-end tax preparation with greater accuracy and confidence.
941 / 940 Reconciliation Report(federal totals)
Payroll → Quarterly → 941/Federal Quarterly Reports (We don’t yet have a 940 but will do what we can to have this year)
Next, these reports verify that federal tax liabilities match deposits and IRS expectations. Review wage bases, employer match totals, and FUTA taxable wages. Checking each of these items before your CPA prepares Q4 filings can save a lot of time and money. For official IRS guidance, reference the Instructions for Form 941 (2025) and Federal Quarter can be used to fill out the 940.
2. W-2 Preview & Employee Record Audit(final employee data accuracy)
Payroll → Yearly → W-2
After the reconciliation report, We suggests previewing every employee’s W-2 before files are created. Checking SSNs, addresses, jurisdictions, taxable wages, and benefit contributions. Having a staff member ensure all employees’ addresses are up to date can prevent your firm from having to re-mail and pay for postage again. Not to mention the time it takes for staff to answer phone calls from employees looking for their W-2 to file taxes. Protecting you from costly W-2 corrections in February. IRS guidance is available in Publication 15 (2025).
3. Client Billing vs Payroll Hours Report(ensure billed = paid)
Reports → Client Reports→ GMGP History & Sales by Hours
Additionally, These reports compare what you billed your clients to what you paid your employees. It identifies missing timecards, overtime errors, incorrect bill rates, and variance between billed vs paid hours — all of which influence year-end totals. These checks are critical for year-end tax prep for staffing agencies. Why? Because wage totals and taxable amounts must match across payroll, billing, and GL activity.
4. W-2 Employee Audit & Year-End Payroll Integrity Check(IRS-compliant wage/tax breakouts)
Payroll → Yearly → W-2
Finally, this W-2 review checks to ensure all taxable wages, benefit deductions, Social Security and Medicare wages, and SUTA wages align with IRS rules. If you issue any vendor 1099s, guidance can be found in the General Instructions for Information Returns (2025) and the IRIS e-file portal.
Starting the New Year Clean
When these reports are aligned, everything else at year-end becomes easier. W-2s generate cleanly, 941 and 940 totals match, and your accountant gets accurate numbers. These steps set your agency up for a confident start to 2026 — and they represent best practices for year-end tax prep for staffing agencies.
