Year-End Payroll & S-Corp Owner Check-In: What to Review Before Closing 2025

It’s another exciting year-end, and it’s the perfect time to take stock of your S-Corp payroll, benefits, and bookkeeping. Especially in light of the tax law changes introduced earlier this year under H.R. 1, the One Big Beautiful Bill Act.

If you caught our summer update on H.R. 1 “What’s in the ‘One Big Beautiful Bill‘”, you already know that several provisions from the Tax Cuts and Jobs Act were made permanent, along with new payroll-related deductions and employer credits.

Now, as 2025 wraps up, it’s time to make sure your payroll, records, and reasonable compensation are all aligned and compliant before you hit “submit” on your final pay runs. 

1. Why This Year-End Review Matters

Year-end is when small oversights can snowball, especially for S-Corp owners who act as both employer and employee.
Health insurance, 401(k) contributions, and reasonable compensation are all on the IRS’s radar, and errors here are among the top reasons S-Corps face amended filings.

A few minutes of cleanup now can save you or your CPA hours of rework (and frustration) during tax season.

2. A Quick Recap of What Changed in 2025

If you missed it, H.R. 1 brought a few key shifts worth revisiting:

• TCJA rate cuts made permanent, keeping individual tax brackets lower for most pass-through owners.
• New payroll-related deductions, like qualified overtime and tip income (primarily for businesses with hourly staff).
• Expanded employer credits for paid leave and childcare programs.
• Payroll system updates required to ensure compliance with the new provisions.

Most S-Corp owners won’t directly benefit from the new “overtime/tip” deductions, but it’s still a reminder that payroll configuration and reporting accuracy matter more than ever.

3. Your S-Corp Year-End Payroll Checklist

However you handle payroll, whether manual or through a payroll service provider, now is the time to make sure your systems, and your bookkeeping, are clean and complete.

✔ Confirm your S-Corp owner health insurance setup.
Health insurance premiums for shareholders should appear on your W-2 in Box 1 only (not Boxes 3 or 5). If you’re unsure, your payroll provider or CPA can verify this setting.

✔ Verify all payroll liabilities are cleared.
In your bookkeeping or your payroll portal, confirm that all 941 and state payments have posted correctly. Liabilities showing as unpaid may indicate mapping errors or duplicate entries.

✔ Review your reasonable compensation.
The IRS requires shareholder-employees to pay themselves a “reasonable salary.” If business profits changed this year, your salary should reflect that. This review protects your S-Corp status and avoids reclassification risk.

✔ Check benefit and contribution accuracy.
Make sure any 401(k), HSA, or Section 125 deductions are accurate and properly coded. Year-end adjustments are much easier now than after W-2s are issued.

✔ Reconcile every account tied to payroll.
This includes health insurance payables, payroll tax liabilities, and owner benefit accounts. Reconcile through the most recent statement date. We’re looking for zero differences and no carryovers.

4. What’s Coming in 2026

While H.R. 1’s provisions have already taken effect, several implementation details and IRS guidance updates are expected early next year.
We’ll continue tracking how these updates affect S-Corp payroll, fringe benefits, and tax planning strategies, and share more insights in future newsletters.

If your business offers employee benefits or plans to expand next year, now is a great time to talk with your CPA about eligibility for the new or enhanced employer credits. 

5. The Bottom Line

Year-end is your opportunity to tidy up payroll, confirm compliance, and position your S-Corp for a smooth tax season.
Even if you’re a one-person operation, proper payroll handling and benefit reporting go a long way toward IRS compliance and toward easier tax prep when it’s time to close the books.

Need a Year-End Payroll Review?

Our team helps S-Corp owners stay ahead of compliance and avoid costly payroll corrections.
If you’d like a quick year-end review or a reasonable compensation analysis, using IRS metrics, before January, reach out to schedule a check-in. We’re looking forward to hearing from you!