Mid-Year Payroll Compliance Check

A Note from Peter Rutkowski, Payroll Managing Director at CIP Group 

At CIP, we believe payroll isn’t just about processing paychecks—it’s about protecting your people and your business through accurate, compliant systems and thoughtful oversight. As we reach the midpoint of the year, it's a great time to take a step back and assess where things stand. 

With decades in this industry, I can tell you: a proactive payroll review now can save you from costly headaches later. Our team at CIP brings deep expertise in tax law, wage and hour regulations, systems integrations, and multi-state operations—and we use that insight every day to keep our clients compliant, informed, and ahead of the curve. 

Below is the checklist our team uses when assisting clients with their mid-year reviews. It includes foundational elements, strategic aspects, and often-overlooked areas. If any of this seems unfamiliar, we are here to help. 

Mid-Year Payroll Compliance Checklist 

1. Reconciliation and Verification 

• Reconcile Year-to-Date (YTD) Reports Ensure YTD payroll reports align with your general ledger and internal reporting. This helps prevent Q4 surprises and costly amendments. 

• Verify Tax Deposits  

  Ensure that federal, state, and local payroll taxes are deposited accurately and on schedule. It is important to check your state communication portals for outstanding balances and rate changes. 

• Audit PTO Accruals Confirm PTO is accruing correctly per policy, and that carryover limits, caps, and usage are up to date. 

• Update Employee Records Mid-year is a great time to review employee records for accuracy—this includes addresses (especially for remote staff), direct deposit details, W-4s, I-9s, emergency contacts, and beneficiaries. 

2. Tax Compliance 

• Account for Mid-Year Tax Rate Changes Update your payroll system to reflect any mid-year changes in state or local tax rates that may affect employee or employer tax liabilities. 

• Review SUTA Rates and Filings Validate your current state unemployment insurance (SUTA) rate and ensure all filings are up to date and correctly applied. 

• Confirm Employee Tax Identifiers Make sure employee SSNs and tax IDs are correct to avoid year-end reporting issues. 

• Encourage W-4 Updates Encourage employees to review and update their withholding if they’ve had major life changes—like marriage, divorce, or a new child. 

3. Employee Classifications and Labor Law Compliance 

• Verify Employee Classification Double-check that exempt and non-exempt designations are correct. Misclassification is one of the most common (and costly) errors we see. 

• Review Independent Contractor Status Review any 1099 contractors to confirm that they meet IRS and DOL guidelines. 

• Update Labor Law Posters Ensure you have current posters for each applicable location, especially if you operate in multiple states or have remote staff. 

• Audit I-9 Forms Confirm I-9s are complete, accurate, and compliant with reverification requirements for applicable employees. 

4. Other Compliance Essentials 

• Wage and Hour Law Review Assess compliance with FLSA standards - especially overtime calculations, minimum wage updates, and proper timekeeping for non-exempt staff. 

• Leave Law Compliance Ensure policies align with FMLA, PFML, and any state-specific leave laws. Mid-year is a good time to review leave balances and system setup. 

• Stay Current on Form I-9 and Labor Guidance Keep up with any updates to Form I-9 processes or union-related changes that could impact payroll. 

5. ACA Compliance and Benefits Integration 

• Monitor ACA Measurement Periods Ensure ongoing tracking of full-time status for ACA purposes, particularly for variable-hour and seasonal employees. 

• Reconcile Benefit Deductions Make sure payroll deductions for medical, dental, vision, and other benefits match the benefit elections in your enrollment platform. 

6. Retirement Plan Integration 

• Audit 401(k)/403(b) Contributions Confirm that deferrals and matches are calculating correctly, remitting timely, and coded to the correct plan year. 

• Check Contribution Limits Review employee deferral amounts to ensure no one has exceeded IRS limits, and verify catch-up contributions are accurately applied. 

• Funding 

    Review your plans for funding with your retirement vendor and utilize any funds allocated to your forfeitures before the end of each year.  

7. Multi-State & Remote Workforce Compliance 

• Review State Tax Withholding Registrations If you've added remote workers in new states, make sure you're registered for the appropriate state income tax and unemployment accounts. 

• Reassess Business Nexus Evaluate whether employee locations are triggering additional business registration, sales tax, or other compliance requirements. 

8. Wage Garnishments and Orders 

• Audit Garnishment Deductions Ensure all court-ordered wage garnishments and child support payments are processed correctly and in compliance with state and federal limits. 

9. Systems and Vendor Management 

• Evaluate Payroll Platform Performance Assess whether your current system supports your compliance goals. If reporting or automation is falling short, consider enhancements ahead of year-end. 

• Review Vendor SLAs If you use third-party vendors for timekeeping, tax filing, or benefits, check that they're delivering as expected—and address any issues now, not in Q4. 

Compliance is an ongoing process. It is a discipline that safeguards your employees, supports your company culture, and provides peace of mind for your leadership. Whether you manage payroll internally or collaborate with our team at CIP, we encourage you to utilize this checklist to evaluate your mid-year compliance status. 

Should any item on this list raise concerns, please feel free to contact us. We are here to assist you in not just meeting the standard but exceeding it.