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Financial Services & Accounting Firms: Year-End Payroll Checklist (2026)
Year-end payroll for financial services firms is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the financial services firm items that decide which boxes are right: IRS Publication 5528. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Financial services firm items that shape the W-2 and 1099s
If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A.
Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received.
Form 5500 series returns for employee benefit plans are due the last day of the seventh month after the plan year ends, which is July 31 for a calendar year plan, and must be filed electronically through EFAST2. The penalty for failure to file is $250 per day, not to exceed $150,000.
The January calendar
W-2s and W-3 to the SSA and copies to employees by January 31; 1099-NEC for each contractor paid $2,000 or more in the year, the threshold for tax years after 2025, by the same date; Form 940 and the fourth-quarter 941 by January 31 as well, with a 10-day extension where all deposits were on time. Ten or more information returns of any kind, counted together, must be filed electronically. For financial services firms the reconciliation that matters is that the pay codes for deferred compensation structures, FINRA recordkeeping and performance fee payroll landed in the right W-2 boxes for every employee.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A. [IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)]
- Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received. [IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)]
- Form 5500 series returns for employee benefit plans are due the last day of the seventh month after the plan year ends, which is July 31 for a calendar year plan, and must be filed electronically through EFAST2. The penalty for failure to file is $250 per day, not to exceed $150,000. [IRS Form 5500 corner]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the financial services firm payroll library.
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Frequently Asked Questions
Year-end for financial services firms: IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)
If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A.
Year-end for financial services firms: IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)
Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received.
When are W-2s and 1099s due for a financial services firm?
January 31 for both, to the recipient and to the SSA or IRS. The 1099-NEC threshold is $2,000 for tax years after 2025, and 10 or more information returns of any type must be e-filed.
What does managed payroll cost for a financial services firm?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Deferred compensation structures, FINRA recordkeeping and performance fee payroll are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Financial Services & Accounting Firms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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