Issue/Symptom/Question

2025 End-of-Year Payroll Guide

Applies To

Penta for Windows

Payroll - End of year

Resolution/Fix/Answer

1 Introduction
2 What's New
3 W-2 Process Checklist
4 1. EFW2 Registration
5 2. Order W-2 Forms
6 3. Schedule Update Installation
7 4. Prepare for the Next Tax Year
8 5. Verify Required Information
9 6. Enter Adjustments & Entries
10 7. Complete Last Period Processes
11 8. Receive Year-End Software Update
12 9. W-2 Returns
13 10. Other Annual Returns
14 11. Third-Party Processing
15 Appendix

Introduction

One of the benefits of your annual license fee is receiving the modifications Penta Software makes to the software for compliance issues, including:

Common federal regulations including W-2 reporting requirements.
Our best effort is to meet state and local regulations, including W-2 reporting requirements.
Updates of federal and state payroll tax tables.

This Guide includes information related to payroll year-end, update installation, W-2 processing, and specific other annual return processing.

PENTA requires that all customers submit their W-2s to the Social Security Administration (SSA) electronically. PENTA does not support paper filing to the SSA.

PENTA supports W-2 laser PostScript® forms for paper employee and employer copies.

Notes:

The use of PostScript forms minimizes printer alignment problems experienced with regular laser and continuous forms. Printing on PostScript forms requires a PostScript-compatible printer.
PostScript is a page definition language for laser printers, created by Adobe Systems, Inc. Printer manufacturers sometimes include either a licensed copy of PostScript from Adobe® or a PostScript emulation program to accompany their printers. The advantage of these printers is that they can print graphics, thus minimizing form/printer alignment problems, and allowing the graphics to vary, depending on the data requirements.

PENTA supports magnetic media and electronic state W-2 submissions. Refer to state publications for information on W-2 filing method(s) accepted. Some states only accept electronic submissions.

What's New

Updated dates and links.
Revised MD-FML dates, the Effective Date for Maryland FAMLI contributions has changed from 2025/07/01 to 2027/01/01.
Minnesota Paid Family Leave Tax Type – MN-FML.
Added DE-PFL, DE-PML, DE-PPL to Box 14 reporting.
Added ME-FML to Box 14 reporting.
Exclude the Box 14 amount for Alabama exempt overtime wages from the Box 16 Alabama state wages.
The OMB No. on the 2025 W-2 form has changed from 1545-0008 to 1545-0029.

W-2 Process Checklist

To run your end of year W-2 tax reporting process, use the following checklist. You can complete Steps 1 through 6 at any appropriate time prior to installation of the year-end software update. Only perform Step 9 (W-2 Returns) and Step 10 (Other Annual Returns) after the update is installed.

As you complete each step, you can place a checkmark in the corresponding box to track your progress. W2 Processing Checklist.pdf

1. EFW2 Registration

SSA

The Social Security Administration (SSA) requires all non-paper submissions of Form W-2 to follow the EFW2 format. PENTA’s federal W-2 file complies with EFW2 requirements.

Companies submitting Form W-2 using the EFW2 format must register with the SSA. Refer to the SSA for specific information on registering as an EFW2 submitter. SSA publications such as Specifications for Filing Forms W2 Electronically (EFW2) for Tax Year 2025 and the SSA’s “Employer W-2 Filing Instructions & Information” webpage (www.ssa.gov/employer/) contains information on EFW2 requirements and registration procedures.

State

Most states follow the SSA and accept electronic and magnetic media submissions in the EFW2 format only. PENTA state files comply with individual state requirements.

Some states may require authorization to file electronically or magnetically. Refer to individual state regulations to determine whether you are required to register or obtain approval to file via these methods.

Note: PENTA users should review SSA publication Specifications for Filing Forms W2 Electronically (EFW2) for Tax Year 2025 to ensure familiarity with SSA requirements and procedures.

2. Order W-2 Forms

W-2 PostScript Laser Form

PENTA supports printing of W-2 PostScript laser forms on Nelco form stock #83631. The PENTA W-2 process prints the boxes as well as data on the front of these forms. The PostScript W-2 minimizes form alignment issues and is the only W-2 form type PENTA supports.

Order W-2 Forms

Order forms through our new preferred paper form supplier Nelco Solutions. Our partner ordering page can be found here with currently supported forms and envelopes.

FORM #83631

8 ½ x 11 –inch sheet, four-corner style

Nelco Solutions offers one version of this form to PENTA users:

Form #83631 – Form W-2 - 4up Quadrant (Instructions on all panels) is a standard Nelco Solutions form. It is a nearly blank 8 ½ x 11-inch sheet, with one vertical perforation and one horizontal perforation, four parts per page, employee instructions preprinted on the back. Use this form for employee copies of W-2s.
For Employer copy forms, your organization might keep W-2 copies on tape, diskette, plain paper, etc. Employer file copy forms are optional.

PENTA produces at least one version of the W-2 form for each employee who paid wages during the calendar year. Employees working in multiple states or local taxing jurisdictions receive multiple W-2s.

A W-2 refers to a full four-part sheet. That is, if an employee works in three states, PENTA produces three W-2 forms, or sheets. All four parts on a single sheet contain the same data.

Increase the quantity of forms ordered to:

Include the number of employees working in multiple states and localities.
Accommodates more than four Box 14 items.
Accommodates more than four Box 12 items.
Allow reprinting of spoiled forms.

Forms supported reflect that PENTA requires customers to submit W-2s to the Social Security Administration (SSA) electronically. PENTA does not support paper filing to the SSA.

PENTA only supports W-2 laser PostScript forms for 2025 employee copies. (Refer to this Guide’s Introduction section for information on PostScript.)

You can order W-2 forms with the form numbers indicated above from our certified business partner, Nelco Solutions. You can also order from any vendor supplying a W-2 form that conforms to one of the supported layouts. Note that form numbers vary from vendor to vendor and that the ones mentioned above are specific to Nelco Solutions. To ensure you receive forms in time to meet year-end obligations, check with individual vendors regarding deadline dates for ordering.

W-2 Box Descriptions

The following table contains descriptions of the W-2 boxes and information on how PENTA provides the data. It is based upon the federal government’s requirements.

Box	Description

Box

Description

a

Employee’s social security number: The employee’s social security number (SSN) in the format 123-45-6789. PENTA prints the Tax ID # from the Employee Payroll Information window.

b

Employer identification number (EIN): The nine-digit federal identification number of the reporting Legal Entity Organizational Unit (“LE OU”) in the format 12-3456789. PENTA prints the Federal Id from the Organizational Units window.

c

Employer’s name, address, and ZIP code: The name and address information of the reporting LE OU. PENTA prints the appropriate fields from the Organizational Units window.

d

Control Number: PENTA does not provide a value for this box. It is optional and the IRS does not use information reported in this box.

e

Employee’s first name and initial; last name: PENTA prints the Name fields from the Employee Payroll Information window. You must enter the Name on the Employee Payroll Information window exactly as it appears on the employee’s social security card.

f

Employee’s address and ZIP code: PENTA prints the appropriate fields from the Employee Payroll Information window.

1

Wages, tips, other compensation: The total wages paid to the employee during the calendar year before any payroll deductions.

2

Federal income tax withheld: The total amount of federal income tax withheld from the employee’s wages during the calendar year. This total includes amounts withheld from normal payroll, manual, bonus, and layoff checks as well as initial load.

3

Social security wages: The amount of wages paid to the employee during the calendar year, prior to any payroll deductions that are subject to social security tax (FICA).

4

Social security tax withheld: The amount of social security tax (FICA) withheld from the employee’s wages during the calendar year. This total includes amounts withheld from normal payroll, manual, bonus, and layoff checks as well as initial load.

5

Medicare wages and tips: The amount of wages paid to the employee during the calendar year, prior to any payroll deductions that are subject to Medicare tax.

6

Medicare tax withheld: The amount of Medicare tax withheld from the employee’s wages during the calendar year. This total includes amounts withheld from normal payroll, manual, bonus, and layoff checks as well as initial load.

7

Social security tips: Additional employee wages in the form of tips for which social security tax was not withheld.

8

Allocated tips: Not used in PENTA.

9

blank

10

Dependent care benefits: The total amount of Sec. 129 dependent care benefits paid or incurred for the employee during the calendar year. PENTA prints amounts you direct to this box via the Other Compensation Information window Report in Box 10 field.

11

Non-qualified plans: The total of distributions to the employee from a non-qualified plan or Section 457 plan. PENTA prints amounts you direct to this box via the Other Compensation Information window to Report in Box 11 field.

12

PENTA prints amounts you direct to this box via the Other Compensation Information window “Report in Box 12” field with the indicated Reporting Print Code.

Each W-2 form allows for four Box 12 items. Additional Box 12 items print on additional W-2 forms.

Available Codes:

Code	Description
A	Uncollected social security or RRTA tax on tips
AA	Roth 401(k) Contributions
B	Uncollected Medicare tax on tips
BB	Roth 403(b) Contributions
C	Cost of group-term life insurance over $50,000
D	Elective deferrals to a 401(k) cash or deferred arrangement
DD	Cost of employer-sponsored health coverage.
E	Elective deferrals to a 403(b)-salary reduction agreement
F	Elective deferrals to a 408(k)(6) salary reduction SEP
G	Elective and non-elective deferrals to a 457(b) deferred compensation plan (state and local government and tax-exempt employers)
H	Elective deferrals to a 501(c)(18)(D) tax-exempt organization plan
J	Nontaxable sick pay
K	20% excise tax on excess golden parachute payments
L	Substantiated employee business expense reimbursements (federal rate)
M	Uncollected social security or Railroad Retirement Tax Act (RRTA) tax on cost of group-term life insurance coverage over $50,000 (for former employees)
N	Uncollected Medicare tax on cost of group-term life insurance coverage over $50,000 (for former employees)
P	Excludable reimbursed moving expenses paid directly to employee
R	Medical savings account contributions made by the employer.
S	SIMPLE retirement account contributions made by an employee under Sec. 408(p).
T	Adoption assistance (employer provided). Include benefits from pre-tax employee contributions to a Sec. 125 adoption account.
V	Income from the exercise of non-statutory stock options.
W	Employer Contributions to a Health Saving Account.
Y	Section 409A Deferral
Z	Section 409A Income

13

Box 13 contains the following checkboxes:

Checkbox	Description
Statutory Employee	If the employee's earnings are subject to Social Security and Medicare taxes but are not subject to federal income tax withholding, PENTA places a checkmark in this box.
Retirement Plan	If this employee is covered by a pension plan, PENTA places a checkmark in the Retirement Plan box. PENTA determines this from Pension Plan information on the Miscellaneous tab of the Employee Payroll Information window.
Third Party Sick Pay	Not applicable to PENTA.

14

Other: Used to report the lease value of a vehicle provided to employees and reported in box 1 if not reported on a separate statement. Also used to report any other information an employer wants to give employees.

PENTA: Alabama exempt overtime wages, SDI, SUI, NJ-FLI, NY-PFL, WA-IND, WA-FML, OR-STT, MA-FML, CT-FML, OR-FML, CO-FML, ME-FML (as MEPFML), VT-CCC, and PA-LST detail print in Box 14 as well as any item directed by the user to print in Box 14 via the Other Compensation Information window. Items directed to print in Box 14 are listed by the Short Description assigned on the Other Compensation Information window. Associated amounts will also be printed. Multiple items with the same short description list once with a total amount. PENTA prints four items in this box. Additional Box 14 items will be printed on additional W-2 forms.

15

State: Contains the two-character U.S. Postal Service abbreviation of the state in which state income tax was withheld. PENTA produces one W-2 form for each state that levies earnings taxes on the employee’s pay.

Employer’s state ID number: Contains the company’s state identification number for the state reported on the form.

16

State wages, tips, etc.: The total amount of the employee’s wages reportable to the state on this W-2 form. Generally, this is wage subject to state tax withholding for the reported state.

This amount does not include group life insurance.

17

State income tax: The amount of state income tax withheld from the employee’s wages during the calendar year for the state reported on this W-2 form. This total includes amounts withheld from normal payroll, manual, bonus, and layoff checks as well as initial load.

18

Local wages, tips, etc.: The total amount of the employee’s wages that are subject to local tax withholding for the local taxing authority reported on this W-2 form.

Pennsylvania Act 32 Localities (Local Taxing Authorities window Tax Type Code field value PA-EIT): Per Pennsylvania Act 32 W-2 instructions, PENTA sums an employee’s wages for all Act 32 localities and the total prints in Box 18 of a single W-2.

19

Local income tax: The amount of local income tax withheld from the employee’s wages during the calendar year for the local taxing authority reported on this W-2 form. This total includes amounts withheld from normal payroll, manual, bonus, and layoff checks as well as initial load.

Pennsylvania Act 32 Localities (Local Taxing Authorities window Tax Type Code field value PA-EIT): Per Pennsylvania Act 32 W-2 instruction, PENTA sums an employee’s income tax amounts for all Act 32 localities and the total prints in Box 19 of a single W-2.

20

Locality name: Contains the name of the local taxing authority for which local income tax was withheld.

Exceptions:

· Some states, such as Ohio, require four-digit school district codes to identify taxation locality. The Local Taxing Authorities window’s Locality Code field is not reported.
To report a taxation code in Box 20 (Locality Name), enter the code as the first characters of the Name field on the Local Taxing Authorities window. PENTA includes the first 18 characters of the Name field in Box 20.

· Pennsylvania Act 32 Localities (Local Taxing Authorities window Tax Type Code field value PA-EIT): Per Pennsylvania Act 32 W-2 instructions, amounts for each Act 32 locality where an employee has taxable earnings are consolidated for a single W-2. Additionally, the 2-digit TCD (Tax Collection Code) of the employer’s Tax Collection Agency prints in Box 20.

3. Schedule Update Installation

One of the benefits of your annual license fee is receiving PENTA payroll year-end reporting modifications along with new tax tables for the following year. Modifications include W-2 layouts and other requirements pertaining to the current reporting year. Penta Software installs these changes during an update process.

Penta Software notifies our customers via the third end of year bulletin. Included in the bulletin is the link to our reservation page that allows you to set up a date and time that works best for your installation. Reservations are available on a first come first served basis.

Note: Setting up your reservation promptly improves the availability of time slots that do not interfere with your payroll processing.

Penta Software generally sends this bulletin in November. The update itself is normally ready for installation in the third week in December. Each year the timing of the update depends on the availability of published information regarding reporting and tax table changes by federal, state, and local tax authorities.

Important! Do not generate final W-2s prior to receiving the update. Until Penta Software installs the update, W-2 processing will not comply with all the current year requirements.

4. Prepare for the Next Tax Year

Process

4.1 Enter New Pay Period Dates

Pay Period dates and Accounting Period dates for the new tax year must exist before you can enter payroll timecards affecting the new year. As the first pay period of a new year often includes days worked in the old year, you can facilitate time entry by setting up these dates before the end of the year.

Enter new Pay Period dates.

Payroll > Setup > Pay Groups, Payroll Classes and Workers Compensation > Pay Groups

Query a Pay Group.
In the Pay Period Dates block, create a record for the new Payroll Year.
Use the Automatic Date Generation pop-up window that appears after adding a new payroll year record to establish pay period ending and check dates or edit as required.
Look ahead at your company holidays to see if a period end date or check date falls on a holiday. You may want to adjust pay period dates now to avoid payroll issues down the line.
Contact general accounting personnel to ensure accounting periods for the new payroll year are in place for all OU Ids in which you process payroll.

4.2 Rates, Limits, and Other Amounts

Changes to various limits, amounts, and rates that affect payroll processing are often effective at the beginning of a new tax/payroll year. Refer to internal sources for changes to pay rates, employee tax filing status, and other internal issues. Government and other publications provide information on changes to legislated items such as 401(k) plans.

A. Review and (if needed) adjust rates, limits, and other amounts.

Payroll >Employees > Employee Payroll Information
Payroll > Setup > Deductions, Reimbursements and Other Compensation >Master Deductions
Payroll > Setup > Deductions, Reimbursements and Other Compensation >Master Reimbursements
Payroll > Setup > Deductions, Reimbursements and Other Compensation > Other Compensation Information
Payroll >Setup > Pay Groups, Payroll Classes and Workers Compensation > Payroll Classes
Payroll > Setup > Taxes > State Codes
Payroll > Setup> Taxes > State Tax Information
Payroll > Employees > Voluntary Deductions
Payroll > Employees > Voluntary Other Compensation Assignment
Payroll > Employees > Voluntary Reimbursements
Payroll > Setup > Taxes > Payroll Tax Maintenance
Project Management > Jobs > Job Standard Charge Schedule > various windows in this folder

Review deduction limits and contribution rates. Enter changes required for the new payroll year in the Master Deductions and Voluntary Deductions windows.
Review reimbursement limits and amounts. Enter changes required for the new payroll year in the Master Reimbursements and Voluntary Reimbursements windows.
Review other compensation amounts and enter changes required for the new payroll year in the Other Compensation Information and Voluntary Other Compensation Assignment windows.
On the Job Standard Charge Schedule windows, enter any changes in Pay Rates or other changes for the new payroll year.
On the Payroll Classes window, enter any changes in Hourly Rates or other changes for the new payroll year.
On the Employee Payroll Information window, enter any changes in Pay Rate Information, W-4 data, or other changes for the new payroll year. See Penta Software’s State Tax Withholding Guide for state-specific information related to withholding status and exemptions.
On the State Codes window, review Unemployment Tax (SUT) Wage Limits for states in which you pay SUT. You can make SUT wage limit changes at any time. PENTA makes wage limit changes announced prior to deadlines when installing the end of year tax kit and with version upgrades. If you make an entry for a state code/effective date and PENTA has a change record for the same state code/effective date, your record has precedence, and PENTA will not add its record.
On the Payroll Tax Maintenance window Rates tab, update as needed rate and earnings limits for Tax Type Codes such as NY- PFL (New York Paid Family Leave), NJ-FLI (New Jersey Family Leave Insurance), OR-STT (Oregon State Transit Tax), WA-IND (Washington Industrial Insurance), WA-FML (Washington Paid Family & Medical Leave), WA-LTC (Washington Long Term Care), DC-PFL (DC Paid Family Leave), CT-FML (Connecticut Paid Family & Medical Leave), MA-FML (Massachusetts Paid Family & Medical Leave), CO_FML (Colorado Paid Family & Medical Leave), ME-FML (Maine Family & Medical Leave) , VT-CCC (VT Child Care Contribution) and OR-FML (Oregon Paid Family & Medical Leave). Refer to the knowledge base page for any changes relevant to 2025.

4.3 Employer-Sponsored Group Health Plans Cost of Coverage

W-2s must include the cost of coverage for employer-sponsored group health plans. Valuation of the cost of employer-sponsored group health plans requires both employer-paid and employee-paid premiums. If you do not currently process both employee-paid and employer-paid premiums with your payroll but would like to begin, follow the procedure below. Processing from the beginning of the year ensures amounts for individual employees will be available when needed for W-2s.

If you need to report group health plan cost of coverage but do not process both employee and employer premiums from the beginning of a tax year, refer to Section 6.7 (Employer-Sponsored Health Coverage Entries & Adjustments) of this Guide.

The Accounting Manager uses the Chart of Accounts window to establish benefit expense and liability accounts if they do not already exist.
The AP Clerk uses the Vendor Information window to establish the benefit plan vendor if it does not already exist.
The Payroll Manager uses the Employee Payroll Information window to review employee setup.
The Payroll Manager uses the Master Deductions window to create an “Employee Portion” Master Deduction.
The Payroll Manager uses the Voluntary Deductions window to assign the “Employee Portion” Master Deduction to employees.
The Payroll Manager uses the Master Deductions window to create an “Employer Portion” Master Deduction to calculate the employer portion of the benefit and offset the “Employer Portion” Master Reimbursement (step 5).
Since this is used to offset a reimbursement, set up as “after tax.” If desired, set the “Print on Check” flag to N.
The Payroll Manager uses the Master Reimbursements window to create an “Employer Portion” Master Reimbursement. Assign Calculation Base #10 (Deduction Amount).
Link this reimbursement to the “Employer Portion” Master Deduction by entering the deduction’s number in the Deduction # field. If desired, set the “Print on Check” flag to N.
The Payroll Manager uses the Voluntary Deductions window to create Voluntary Deductions for the “Employer Portion” Master Deduction and link it to the employee along with the appropriate calculation amount.
The Payroll Manager uses the Voluntary Reimbursements window to create Voluntary Reimbursements for the “Employer Portion” Master Reimbursement and link it to the Employee. PENTA calculates the reimbursement and sets it equal to the deduction.
Payroll personnel perform the Payroll Check Processing Business Process (located in the Penta Learning Center – Payroll Workflow) to process payroll and review results on checks, queries, and reports.
The Payroll Manager uses the Other Compensation Information window to specify the W-2 print location.
1. Create an Other Compensation master record with the Include in all Earnings flag set to N.
2. Link the Employer Portion Reimbursement to the Other Compensation by entering the reimbursement number in the “Link to Reimbursements” block of the Other Compensation Information window.
3. Link the Employee Portion Deduction to the same Other Compensation by entering the deduction number in the “Link to Deductions” block of the Other Compensation Information window.
4. Enter Y in the Report in Box 12 (Codes) field of the Other Compensation.
5. Enter DD in the adjacent Reporting Print Code field.
6. Note: Do not assign this Other Compensation to employees.

5. Verify Required Information

Specific employer and employee information may have changed during the year or may not have been entered during initial set up. Because this information is vital for correct W-2 processing, you should verify it prior to W-2 generation.

You may need to verify employee earnings and taxes to ensure all types of earnings were recorded and taxed correctly.

Process

5.1 Verify Employer Information

A. Verify Employer Name, Address, & ZIP Code

Although PENTA does not require address information during OU setup, the IRS requires it in Box c of the W-2 form. Verify that each of the company’s LE OUs have this information defined.

Finance & Accounting > Setup > Organization Units > Organizational Units > Setup/Address tab

Verify the name and address information for each LE OU.
Verify the Federal Employer Id

The federal government requires separate reporting for every entity with a Federal Id. During setup of a Legal Entity Organizational Unit (LE OU), PENTA requires entry of the Federal Employer Id. This Id must be exactly nine digits in the format 12-3456789.

Finance & Accounting > Setup > Organization Units > Organizational Units > Legal Entity tab

Verify that every LE OU record contains the correct Federal Id.

5.2 Verify State Tax Identification Numbers

If you did not define state tax and state unemployment compensation (UC) account numbers for any state in which an employee received payment, PENTA prohibits W-2 generation. The W-2 process generates an online review list of such states. If a state appears on this list, then the following are true:

At least one pay record exists for that state in the OU you are processing.
You have not set up employer identification numbers for the OU in that state.

PENTA does not generate W-2s until you set up the missing employer state tax identification numbers.

A. Review status of state tax Identification numbers.

Payroll > Year End Processing Reporting > W2 Generation

Enter a Legal Entity OU Id.
In the Calendar Year field, enter 2025.

If state identification numbers exist for all states with pay records, PENTA advances the cursor to the next field and verification of state tax information is complete.

If any states with pay records do not have identification numbers, PENTA displays an error listing the states.

Note the states with missing State Tax Ids and click the OK button.
Repeat Step 5.2.A for each LE OU for which you generate W-2s.

Note: If a state appears in the list seemingly by mistake, print the PR Tax Status Report – State to review which employees have pay records in this state under this LE OU. If an employee should not have received payment in this state, use the Manual Checks window to move the wages and taxes out of the wrong state and into the correct one prior to producing W-2s. (For more information, refer to this Guide’s Enter Wage Adjustments section).

B. Set up missing state tax identification numbers and verify that existing numbers are correct.

Payroll > Setup >Taxes > State Tax Information

Enter complete data for each of the states identified in the list generated by PENTA in this Guide’s Review Status of State Tax Identification Numbers
Note: You should review any state that appeared in the list for unemployment and disability tax calculation and reporting issues.
Query each LE OU and state combination for which you will generate W-2s, but that were not on the review list. Review the State Tax Id # and the State UC ID # and make corrections as necessary.
Note: PENTA reports these values in state W-2 electronic/magnetic media files as necessary. Ensure they include the tax Id components required by the state. Per individual state specifications, PENTA excludes non-digits such as hyphens when reporting in electronic files.

C. Review Special Identification Numbers for States with Special Requirements

Pop-up windows specific to certain states display only when the State Code identifies a state with special requirements.

IOWA Business eFile Number
When the State Code is IA, the Additional IA Info button is visible in the State Tax Information window.