2024 Payroll Compliance Checklist

Payroll compliance isn't optional — errors can result in hefty fines, legal action, and damage to employee trust. This guide walks through every critical requirement to keep your payroll processes clean and compliant throughout the year.

Federal Requirements

Employee Classification

One of the most common (and costly) compliance failures is misclassifying workers:

W-2 Employees vs. 1099 Contractors — the IRS uses behavioral control, financial control, and relationship type to determine classification. When in doubt, default to employee status.
Exempt vs. Non-exempt — the FLSA requires non-exempt employees to receive overtime pay (1.5× regular rate) for hours worked over 40 per week. Exemptions are based on salary threshold AND job duties, not just title.
2024 salary threshold — the DOL updated the minimum salary for exempt status. Verify your exempt employees still meet the threshold.

Tax Withholding & Reporting

Collect a current W-4 from every employee. Re-collect when life events change withholding (marriage, new dependents, etc.)
Withhold and remit federal income tax, Social Security (6.2% up to the wage base), and Medicare (1.45% + 0.9% additional for high earners)
File Form 941 quarterly — reports income tax, Social Security, and Medicare withholdings
File Form 940 annually — reports Federal Unemployment Tax (FUTA)
Distribute W-2 forms to employees by January 31 each year
Distribute 1099-NEC forms to independent contractors by January 31

Minimum Wage & Overtime

Federal minimum wage: $7.25/hour (unchanged since 2009)
Many states and cities have higher minimums — always apply the highest applicable rate
Overtime: 1.5× regular rate for hours over 40/week for non-exempt employees
Some states require daily overtime (e.g., California: overtime after 8 hours in a day)

State-Level Requirements

State laws vary significantly. For each state where you have employees, verify:

State income tax withholding — rates, brackets, and filing frequency differ by state
State unemployment insurance (SUI) — rates are experience-rated and vary by employer
Workers' compensation — most states require coverage; rates depend on industry and claims history
Disability insurance — required in CA, HI, NJ, NY, RI, and Puerto Rico
Paid family and medical leave — growing number of states mandate employer contributions
State-specific pay stub requirements — some states require detailed earnings breakdowns on every pay stub

Recordkeeping Requirements

The FLSA requires employers to maintain payroll records for at least 3 years. Records should include:

Employee name, address, SSN, and date of birth
Hours worked each day and total hours each week
Regular hourly pay rate and basis of pay
Total daily or weekly earnings
All additions to or deductions from wages
Total wages paid each pay period
Date of payment and pay period covered

Key Compliance Deadlines for 2024

| Deadline | Requirement | |----------|-------------| | Jan 31 | Distribute W-2s and 1099-NECs to employees/contractors | | Jan 31 | File Form 940 (annual FUTA) | | Jan 31 | File Form 941 for Q4 of prior year | | Feb 28 | File W-2s and 1099s with SSA/IRS (paper) | | Mar 31 | File W-2s and 1099s with SSA/IRS (electronic) | | Apr 30 | File Form 941 for Q1 | | Jul 31 | File Form 941 for Q2 | | Oct 31 | File Form 941 for Q3 |

Common Compliance Mistakes

Missing deadlines — late filings incur penalties that compound quickly
Incorrect employee classification — misclassifying employees as contractors can result in back taxes, penalties, and interest
Failing to update for new laws — minimum wage increases, new leave mandates, and tax changes happen every year
Inconsistent recordkeeping — if audited, incomplete records shift the burden of proof to the employer
Ignoring multi-state obligations — remote employees may create nexus in states where you haven't been filing

Audit Preparation Tips

Run a self-audit quarterly — review classifications, rates, and withholdings
Keep payroll records organized and easily accessible for at least 3 years
Document any payroll corrections and the reason for each change
Train payroll staff on current federal and state requirements
Use certified payroll software with built-in compliance checks

2024 Payroll Compliance Checklist