CHAPTER 20- Payroll
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20.1- The Payroll Process:
Before you can use the payroll features of QuickBooks, you must set up payroll for your company in QuickBooks. To find out how you do this, select “Employees| Payroll| Turn on Payroll in QuickBooks” from the Menu Bar. In the window that then appears, you can evaluate the payroll plans and purchase a payroll plan through QuickBooks to begin the setup of your initial payroll data.
After you have purchased a payroll plan you can setup basic payroll information by selecting
“Employees| Payroll Setup” from the Menu Bar. Use the “QuickBooks Payroll Setup” wizard to input the information that QuickBooks will need to know in order to begin processing payroll for your company file.
QuickBooks uses the tax tables that come with your payroll subscription to calculate employee payroll.
QuickBooks calculates each employee’s gross pay, taxes, deductions, and net pay. In QuickBooks, you can write the paycheck, record the transactions for the correct accounts, print payroll forms, and keep track of your tax liabilities.
As an employer, you must subtract taxes and other deductions before issuing an employee’s paycheck. Some typical paycheck deductions are federal and state withholding taxes (income taxes), social security taxes (FICA), Medicare taxes, and state unemployment insurance. You may also deduct for benefits such as 401 (k) plan, or contributions to your company’s medical/dental plan. When you withhold social security, Medicare, and federal withholding taxes from employee paychecks, you must submit regular deposits of the withheld money and file quarterly forms that list the amounts withheld from each employee paycheck. Here is an overview of the payroll process and the steps that you must complete to do payroll.
Payroll
INFORMATION: DESCRIPTION:
Enter information about your company. This includes information about your federal and state tax ID numbers.
You enter this information when you set up your QuickBooks company in the EasyStep interview. You can later view company information by selecting “Company| Company Information” from the Menu Bar.
Enter information about your employees. The QuickBooks “Employees” list stores general information about your employees, and specific information related to payroll (such as the employee’s salary or hourly rate, filing status, number of
exemptions, and miscellaneous additions, deductions, and company contributions). You can store payroll information that most employees have in common in employee defaults. Then, whenever you have a new employee to add, simply enter information that’s specific to that employee (name, address, etc…).
Enter information about your payroll items. QuickBooks maintains a “Payroll Item List” that contain items that affect the amounts on a paycheck, including company payroll expenses. When you specify you want to use payroll, QuickBooks
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20.2- Creating Payroll Items:
QuickBooks maintains a list of all the items that affect payroll amounts, including payroll expenses, in the “Payroll Item” list. There are payroll items for compensation, taxes, other additions and deductions, and employer-paid expenses. QuickBooks uses payroll items to track individual amounts on a paycheck and accumulated year-to-date wage and tax amounts for each employee.
When you set up payroll for your company in QuickBooks, many items are added to the list for you.
However, you can also manually create others if you need them. You can view the current set of payroll items by selecting “Lists| Payroll Item List” from the Menu Bar. You can access the commands that you need to manage the entries in this list by clicking the “Payroll Item” button in the lower-left corner of this list.
To add a new payroll item, click the “Payroll Item” button in the lower-left corner of the “Payroll Item List” and then select the “New” command from the pop-up menu that appears. In the “Add new payroll item”
window, answer the questions posed to you on each screen and then click the “Next” button until you have set up the new item. Click “Finish” when you are done to add the selected item into the “Payroll Item” list.
Payroll
Employee Center” from the Menu Bar to open it. Then click the “Manage Employee Information” button in the toolbar at the top of the “Employee Center” window and select the “Change New Employee Default Settings” command.
In the “Employee Defaults” window that appears, enter any information that you would like to have appear by default whenever you create a new employee record. You can also set default tax information, or default sick and vacation time information, by clicking either the “Taxes…” or “Sick/Vacation…” buttons to set default values for those categories in the separate “Taxes Defaults” and “Sick and Vacation Defaults”
dialog boxes. When you have finished setting all of your employee defaults, click the “OK” button to save them.
20.4- Setting Up Employee Payroll Information:
You can enter employee payroll information when you add new employees to the “Employees” list within the “New Employee” window. You can also edit the employee’s payroll data by using the “Edit Employee” window, if the payroll info changes. In either the “New Employee” or “Edit Employee” windows, you can enter or edit payroll information by selecting the “Payroll Info” tab at the left side of either window.
On the “Payroll Info” tab, select the payroll schedule for the employee from the “Payroll Schedule”
drop-down menu. Then enter the type of pay the employee receives by selecting a compensation “Payroll Item” from the “Item Name” column within the “Earnings” section. To the right of that selected item, you can then enter the amount of compensation into the “Hourly/Annual Rate” column. Then enter any additions, deductions or company contributions in the “Additions, Deductions & Company Contributions” section by selecting the name of the desired “Payroll Item” from the “Item Name” column. Then enter the “Amount” for each item entered, as well as the annual “Limit” for each, if needed. If the employee uses time data entered
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20.4- Setting Up Employee Payroll Information- (cont’d.):
into the “Weekly Timesheet” or the “Time/Enter Single Activity” windows in order to record their hours worked, then select the “Use time data to create paychecks” checkbox at the bottom of the tab. If the employee is covered by a qualifying pension plan, check the “Employee is covered by a qualifying pension plan” checkbox.
You can then set the employee’s payroll tax data by clicking the “Taxes…” button to open the
“Taxes” dialog box. Here you enter the employee’s payroll tax withholding information into the “Federal,”
“State,” and “Other” tabs. Note that the “Other” tab is used for any special state or local payroll tax information required. Once you have entered their payroll tax information, click the “OK” button within the
“Taxes” dialog box to return to the “New Employee” or “Edit Employee” window.
You can enter the employee’s sick and vacation time by clicking the “Sick/Vacation…” button within the “Payroll Info” tab to open the “Sick and Vacation” dialog box. In the “Sick” and “Vacation” sections, you can use the “Accrual Period” drop-down to select how the employee accrues sick and vacation time. You can then enter the number of hours to accrue, the maximum number of hours to accrue, as well as if and when the number of hours are to be reset by entering the desired values into the fields available. When you have finished entering the sick and vacation information for the employee, click the “OK” button within the
“Sick and Vacation” dialog box to return to the “New Employee” or “Edit Employee” window.
When you are finished setting up the employee’s payroll data, click the “OK” button within either the
“New Employee” or “Edit Employee” windows to close the window and save your changes.
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20.5- Creating Payroll Schedules:
In QuickBooks, you will most often create employee paychecks by using the scheduled payroll feature. However, if needed, you can also print unscheduled employee paychecks as well as termination paychecks.
Before you start a scheduled payroll, however, you must first create at least one payroll schedule.
You can create and modify payroll schedules by selecting “Employees| Add or Edit Payroll Schedules” from the Menu Bar to open the “Payroll Schedule List.” To create a new payroll schedule, click the “Payroll Schedule” button and then choose the “New” command.
In the “New Payroll Schedule” window that appears, enter a name for the payroll schedule into the
“What do you want to name this payroll schedule?” field. Use the next field’s drop-down to select the frequency with which this payroll will recur. After that, use the “What is the pay period end date?” calendar selector to select the final date in the pay period. Then use the “What date should appear on paychecks for this pay period?” calendar selector to select the paycheck date for the payroll. If you chose to create a semimonthly or monthly payroll, you may also need to answer a few more date-related questions in this screen. Once you have entered the payroll schedule information, click the “OK” button. You can then follow the onscreen prompts to assign employees with the same payroll frequency to the selected payroll schedule.
20.6- Creating Scheduled Paychecks:
You can create and print employee paychecks for a scheduled payroll by either selecting
“Employees| Pay Employees| Scheduled Payroll” from the Menu Bar or by clicking the “Pay Employees”
button in the Home page to open the “Employee Center: Payroll Center” window.
In “Pay Employees” section of the window, select the name of the payroll schedule to pay from the listing shown. Then click the “Start Scheduled Payroll…” button to open the “Enter Payroll Information”
window where you will see the employees assigned to the selected payroll schedule. All employees that you want to pay on this schedule should appear here with a checkmark next to their names. You then need to check to ensure that the data shown in the “Payroll Information” section is correct. Also review the hours worked and amounts shown for each employee. If you need to make changes to a paycheck, click the hyperlinked name of the employee within this list whose paycheck you wish to inspect to open their paycheck within a “Preview Paycheck” window where you can edit the information and then click the “Save
& Close” button to finish. After reviewing the payroll information for accuracy, click the “Continue” button to continue paying the employees.
Next, review the summary information in the “Review and Create Paychecks” window. In the
“Paycheck Options” section, you can select the option button for “Print paychecks from QuickBooks” to create the paychecks and print them. If you are recording paychecks that have already been created, you can select the “Assign check numbers to handwritten checks” option button and then enter the first check number into the “First Check Number” field. You can then click the “Create Paychecks” button to create the selected paychecks for the scheduled payroll. You can then use the “Confirmation and Next Steps” window that appears to finish the payroll. Within this window you can click the “Print Paychecks” button to print the paychecks that you just created if you chose to print paychecks in QuickBooks. You can click the “Print Pay Stubs” button to print paystubs for the checks, if needed. When you are done, click the “Close” button.
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20.7- Creating Unscheduled Paychecks:
You can also create unscheduled paychecks for additional checks, such as bonus checks. You can select “Employees| Pay Employees| Unscheduled Payroll” from the Menu Bar to open the “Enter Payroll Information” window. Here you manually set the “Pay Period Ends” and “Check Date.” Then select the account from which the funds will be withdrawn from the “Bank Account:” drop-down. You then place a checkmark next to the names of the employees to pay. When you are ready, click the “Continue” button to continue creating the paychecks. In the next screen, select whether the check should be printed, or assigned a check number in the “Paycheck Options” section. You can then click on the hyperlinked name of the employee shown within the list to open the “Preview Paycheck” window where you can review and edit the payroll information, if needed. After entering or editing the paycheck details, click the “Save & Close”
button. Once you are ready to create the paychecks, click the “Create Paychecks” button. If you are printing the paychecks within QuickBooks, you can then click either the “Print Paychecks” or “Print Pay Stubs”
button, as needed, and then click the “Close” button to finish.
20.8- Creating Termination Paychecks:
You can also create termination paychecks when an employee leaves. You can select “Employees|
Pay Employees| Termination Check” from the Menu Bar to open the “Enter Payroll Information” window.
Here you manually set the “Pay Period Ends” and “Check Date.” Then select the account from which the funds will be withdrawn from the “Bank Account:” drop-down. You then place a checkmark next to the names of the employees who need a termination check. To the right of their names, under the “Release Date” column, enter the employee’s release date. This information will be updated within their employee record when you create the paychecks. When you are ready, click the “Continue” button to continue creating the paychecks. In the next screen, select whether the check should be printed, or assigned a check number in the “Paycheck Options” section. You can then click on the hyperlinked name of the employee shown within the list to open the “Preview Paycheck” window where you can review and edit the payroll information, if needed. After entering or editing the paycheck details, click the “Save & Close” button. Once you are ready to create the paychecks, click the “Create Paychecks” button. If you are printing the paychecks within QuickBooks, you can then click either the “Print Paychecks” or “Print Pay Stubs” button, as needed, and then click the “Close” button to finish.
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20.9- Voiding Paychecks:
You can void paychecks, if needed. To void a paycheck, you will need to display the paycheck that you want to void within the “Write Checks” window or by using the appropriate checking account register.
With the desired paycheck to void displayed, select “Edit| Void Paycheck” from the Menu Bar.
20.10- Tracking Your Tax Liabilities:
As the employer, you need to track both the payroll expenses and payroll liabilities. The payroll expenses you need to track are the employee’s gross pay and the employer’s payroll taxes. QuickBooks uses an account called “Payroll Expenses” to track the actual costs to your company. Whatever funds you deduct from employee paychecks aren’t shown here. Those funds are placed into an account called
“Payroll Liabilities.” That makes it easy to see what payroll taxes you owe, so that you can have the necessary cash available for payment.
As long as you have a valid subscription to one of the QuickBooks payroll options, QuickBooks uses the current payroll tax tables to keep track of your tax liabilities as they accrue, so that you know how much you owe as of a given date.
When you are ready to pay your payroll liabilities, you may want to see the amount you will be paying. You can run a “Payroll Liabilities” report to see how much you owe in payroll liabilities. You can access this report by selecting “Reports| Employees & Payroll| Payroll Liability Balances” from the Menu Bar.
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20.11- Paying Payroll Tax Liabilities:
Once you are ready to write a check for the payroll liabilities, you must write a “Liability Check.”
Don’t just write a check to cover payroll liabilities! Unless you use the method shown, QuickBooks will not properly adjust the Payroll Liabilities account! When you write a check (or enter a General Journal entry) against the “Payroll Liabilities” account without specifying which liabilities are adjusted, it will take the total amount of the adjustment and disburse it amongst the individual liabilities. This will then cause the balance of each individual liability to be incorrect! While you can fix it by making liability adjustments to the individual liabilities, it is tedious to fix and best avoided.
When you subscribe to one of the QuickBooks payroll tax services, you set up scheduled liability payments as part of the Payroll Setup process. You can view this information within the Payroll Center in QuickBooks. To pay your scheduled payroll liabilities, just select “Employees| Payroll Taxes and Liabilities|
Pay Scheduled Liabilities” from the Menu Bar. You can then check the scheduled payments to make from the listing shown in the “Pay Scheduled Liabilities” section of the “Employee Center: Payroll Center”
window. You can then click the “View/Pay” button to open the “Liability Check” window where you can review the liability check or checks to be created. You can then click the “Save & Close” button to finish and save the checks for printing.
If needed, you can select “Employees| Payroll Taxes and Liabilities| Create Custom Liability Payments” to create a custom liability payment for your payroll liabilities. In the window that appears, you select the date range of the liabilities to pay. Then click the “OK” button to view the “Pay Liabilities” window.
In the “Pay Liabilities” window, place a checkmark next to the individual payroll liabilities that you want to pay with the custom liability payment. If you want to create checks for printing, ensure that the “To be printed” checkbox is selected. Next, make sure that the option button for “Review liability check to enter expenses/penalties” is selected and then click the “Create” button to create the “Liability Checks.” Note that this type of check has a special tab at the bottom that indicates exactly which liabilities are being paid with that check. If you have additional penalties to add, you can to that on the “Expenses” tab. If you do make modifications to the check, save and close the check when finished to save changes that you have made.
20.12- Adjusting Payroll Liabilities:
If you are using Assisted Payroll, you can’t adjust the liability balance for liabilities paid by the payroll service, meaning the federal and state tax liabilities. However, you can adjust the liability balance for local or other taxes not supported by the payroll service.
If you are not using Assisted Payroll or higher, or are in the process of signing up for it, you can
If you are not using Assisted Payroll or higher, or are in the process of signing up for it, you can