Chapter 20
Paying Your Employees with QuickBooks Payroll
In this chapter:
• Choose a payroll service
• Run a manual payroll
• Set up payroll items
• Set up employee information
• Enter historical data
• Issue payroll checks
• Use the Employee Center
If you plan on processing your payroll through QuickBooks, the information you need to set it up is in this chapter. Now may also be a good time to consult with your accountant for advice on choosing the payroll option that best fits your business needs and to ensure that your setup is fully compliant with your local and state taxing authorities.
QuickBooks Payroll Services
QuickBooks offers a variety of payroll services designed to work with your company data. Here’s a brief recap of what’s currently available:
• Basic Payroll provides tax tables and automatic calculations of paycheck deductions and employer expenses for up to three employees. No tax forms are included, so you either need to work with your accountant on tax filings or prepare your tax forms manually. QuickBooks makes it easy to prepare tax forms manually by providing detailed reports in Excel (covered in Chapter 21).
• Enhanced Payroll adds tax forms and e-filing for both federal and state reporting.
• Full Payroll turns the job of running your payroll, depositing withholdings, paying employer contributions, and printing and filing government forms over to QuickBooks. All you have to do is enter your employees’ hours.
Additional plans are available, such as Intuit’s Online Payroll service, which does not require that you use QuickBooks for your accounting, and Enhanced Payroll for Accountants, which lets you prepare payroll for up to 50 companies (including preparing federal and state forms) and includes After The Fact payroll data entry capability. If you’re looking for a complete solution, consider the Intuit Full Service option—you enter your employees’ time, and Intuit handles the rest.
Enabling a QuickBooks Payroll Service
If you haven’t already done so, be sure the Full Payroll feature preference is enabled in your QuickBooks company file by choosing Edit | Preferences | Payroll & Employees | Company Preferences | Full Payroll. Selecting this option enables payroll-related information fields for employees and also adds a Turn On Payroll button in the Employee section of the QuickBooks Home Page. Click the Turn On Payroll button to learn about and sign up for one of the QuickBooks payroll offerings.
When the sign-up process is completed, download the files you need to run payroll. The new files are automatically added to your QuickBooks system; you don’t have to do anything to install them. In addition to the payroll software, the current tax table is added to your system. After payroll is installed, your Employees menu has all the commands you need to run payroll.
ProAdvisor RecommendsProcessing Your Payroll Manually in QuickBooks
Some small businesses with one or two employees may choose to run a manual payroll through QuickBooks. Keep in mind that if you choose to process your payroll manually, no withholding or tax will automatically be calculated for any paycheck you create—you have to sign up for the QuickBooks payroll service for that. But you can use your own printed tax table (Employer’s Circular E from the IRS), calculate the deductions, and enter them manually when you create paychecks.
However, you’ll need to set up your file to allow you to enter these amounts manually, and the only way to tell QuickBooks you want to exercise this option is via the Help menu:
1. Select QuickBooks Help from the main Help menu to open the Have A Question? window.
2. In the Search field, type manual payroll, and then click the magnifying glass (search) icon. QuickBooks will display several Help articles—click the article titled “Process Payroll Manually (Without A Subscription To QuickBooks Payroll).” Within this article is a topic titled “If You Prefer to Process Your Payroll Manually.” Locate and click the link Manual Payroll Calculations that’s embedded within this topic.
3. From here, you’ll be brought to a new Help article called “Are You Sure You Want to Set Your Company File to Use Manual Calculations?” Click the link at the end of this article—Set My Company File To Use Manual Calculations.
If you do elect to process your payroll manually, you’ll still need to set up Employees and Payroll Items and track Payroll Liabilities—all of which are covered in the following sections.
It may seem like quite a lot to go through, so the decision to run a manual payroll should be made only after careful consideration and consultation with your accountant and if you’re running a very simple payroll for only one or two employees. It will be up to you to ensure that the calculations are correct and you have a system in place to remit your withholdings to the appropriate agency in a timely manner.
Setting Up Your Payroll
To produce accurate paychecks, you need to add accounts to your chart of accounts; create payroll items (salary, wages, and so on); and identify the payroll taxes you have to withhold, the payroll taxes you have to pay as an employer, and company contributions or deductions. And you also need to set up tax information for each employee, such as dependents and deductions.
You can set up these payroll elements in either of two ways:
• Manually
• Using the Payroll Setup wizard
The following sections cover all the steps involved in setting up payroll manually, and later in this chapter you’ll learn to use the Payroll Setup wizard. You can review both to decide which way you want to approach the setup.
Adding Payroll Accounts to the Chart of Accounts
You may need to create new accounts in your chart of accounts for payroll. For example, some businesses use a bank account specifically for payroll instead of using their main bank account. QuickBooks automatically adds the Payroll Liabilities and Payroll Expenses accounts when you enable payroll.
You should use subaccounts for payroll liabilities and payroll expenses, because it makes it easier to keep track of individual liabilities and expenses (see Figure 20-1). Be sure to link your payroll items to these subaccounts and not to the parent account. Then, when you create reports, any balances in the subaccounts are totaled in the parent account.
FIGURE 20-1 |
Use subaccounts to make it easier to track payroll liabilities and expenses. |
Adding Vendors
Running payroll creates liabilities for payroll taxes and employee benefits that are withheld or deducted. In QuickBooks, the government agency or employee benefit provider to which you remit these withheld amounts needs to be set up as a vendor. Then when you set up the payroll item that tracks the withholding or deduction (discussed in the next section), you can assign that item to the appropriate vendor.
For withholding of federal income taxes, Medicare, FICA, and the matching employer Medicare and FICA payments, you can assign the United States Treasury Department as the vendor.
For local and state income tax, unemployment, disability, workers comp, and deductions for benefits such as health insurance, set up a vendor for each agency you need to pay. Most states now offer electronic payments for payroll remittances on their websites, but if you use checks you probably have forms or coupons that should accompany your payments.
ProAdvisor Tip: Beginning January 1, 2011, the IRS requires that all payroll tax deposits be made electronically using the Employer Federal Tax Payment System (EFTPS). EFTPS deposits can be made online or by telephone, from the convenience of your home or office. If you haven’t already done so, you’ll need to go to the EFTPS website (www.eftps.gov) to learn more and enroll.
Adding Payroll Items
QuickBooks uses payroll items to list compensation or deduction amounts on a payroll check. The number of individual payroll items that make up a paycheck may be more than you thought. Consider this list, which is typical of many businesses:
• Salaries
• Wages (hourly)
• Overtime (time and a half)
• Double-time
• Federal tax withholdings (including FIT, FICA, and Medicare)
• State tax withholdings
• State unemployment and disability withholdings
• Local tax withholdings
• Pension plan deductions
• Medical insurance deductions
• Life insurance deductions
• Garnishes (such as child support)
• Union dues
• Reimbursement for auto expenses
• Bonuses
• Commissions
• Holiday pay
• Sick pay
• Advanced Earned Income Credit
Whew! And don’t forget that you also have to track company-paid payroll items, such as matching FICA and Medicare, employer contributions to unemployment (both state and federal), state disability funds, pension and medical benefit plans, and more.
You can view your payroll items and create new payroll items by choosing Lists | Payroll Item List to open the Payroll Item List seen in Figure 20-2. QuickBooks adds some items to the list automatically when you enable payroll services. Usually, local taxes, medical benefits deductions, and other payroll items are missing and the items that do exist may be missing information about the vendor, so you’ll have to edit them to add that information.
FIGURE 20-2 |
Some payroll items are created automatically by QuickBooks, while others may need to be added by you. |
To add a new payroll item, from the Payroll Item List window, press CTRL-N (or right click) to open the Add New Payroll Item wizard shown in Figure 20-3. In this window, you’re asked to select one of two payroll item setup methods: EZ Setup or Custom Setup.
FIGURE 20-3 |
The Add New Payroll Item wizard helps you create a payroll item. |
Following is an explanation of what to expect with each option.
EZ Setup of Payroll Items
If you select the EZ Setup option, when you click Next you see a list of payroll item types. The descriptions are brief, but basically you can create any type of pay, deduction, or company benefit, paid by the company, the employee, or both. The only types of payroll items you cannot create in EZ Setup are state and local payroll taxes, including state unemployment and/or disability taxes.
When you use the EZ Setup option, after you select the type of item, QuickBooks loads the Payroll Setup wizard and then displays the Add New dialog from that feature. The questions and explanations you see in the Payroll Setup wizard are more basic than the questions you’re asked if you select the Custom Setup option for setting up a payroll item. You need less knowledge of payroll processing to complete the setup, but you’ll spend more time moving through more wizard windows, because most of the data you provide is entered one wizard window at a time. This does not mean you can set up a payroll item accurately if you know nothing about deductions, benefits, or the accounting and legal issues involved with payroll benefits and deductions (which is why it’s always a good idea to consult with an accounting professional when payroll is involved). What it does mean, however, is that the explanations you see when you’re asked to provide information are easy to understand.
For example, if you’re setting up a benefit such as health insurance, pension benefit, or any form of a benefit in a cafeteria plan, the wizard asks you if the benefit cost is borne entirely by the company, entirely by the employee, or shared between both. Depending on your answer, the wizard moves through the subsequent windows to set up the necessary payroll item(s). In addition, if the employee contributes some or all of the cost, you have to know whether it’s a pre-tax or after-tax deduction, and you have to know how the deduction affects the employee’s W-2 form. Perhaps yet another reason to discuss your payroll setup with your accountant first!
Custom Setup of Payroll Items
If you select the Custom Setup option, the list you see when you click Next is all inclusive. You can set up all the payroll item types offered in the EZ Setup list of payroll types, plus you can also set up state and local payroll items. You’ll find that, unlike the EZ Setup wizard, each window in the Custom Setup wizard contains most all the fields for the required information, resulting in fewer steps needed to complete the setup of a payroll item.
Keep in mind, however, that if you have a health benefit with costs shared between the company and the employee, the Custom Setup wizard isn’t going to remind you that you have to set up two items: first one for the employee deduction and another for the company payment. In this instance, you have to start the wizard again to select Company Contribution in the second wizard window to set up the company side of the health benefits item.
Set Up Employees
The information about your employees must be accurate; otherwise, you may find yourself having to adjust payroll information inside QuickBooks and then having to report these changes to the IRS—which means more work for you and potential confusion with the IRS about your payroll withholding data.
There is a great deal of information to fill out for each employee, and some of it is probably the same for all or most of your employees. For example, many of your employees may share the same type of pay (salary or hourly wage) or the same deductions for medical insurance.
To save yourself a lot of time, you can create a new employee default (or New Employee Default (template). The information you put into the template is then automatically added to the Payroll Info tab for each new employee you create.
Creating an Employee Template
To access the template, you open the Employee Center by choosing Employees | Employee Center from the menu bar.
In the Employee Center window, click the Manage Employee Information button at the top of the window and choose Change New Employee Default Settings from the submenu that appears. This opens the Employee Defaults window, where you can enter the data that applies to most or all of your employees.
1. Click in the Item Name column of the Earnings box, and then click the arrow to see a list of earnings types that you’ve defined as payroll items. Select the one that is common enough to be suitable for a template.
2. In the Hourly/Annual Rate column, enter a wage or salary figure if one applies to most of your employees. If not, just skip it; you can enter each employee’s rate in the individual employee record later.
3. Click the arrow in the field to the right of the Payroll Schedule field and select a schedule. If you don’t have any established payroll schedules, you can add a new one here if you wish. See the section “Payroll Schedules” later in this chapter for more information.
4. Select a Pay Frequency (if you created schedules and selected one, QuickBooks automatically uses that schedule to fill in the Pay Frequency field).
5. Use the Class field if you’ve enabled classes to track data.
6. If you’re using QuickBooks time-tracking features to pay employees, you’ll also see a Use Time Data To Create Paychecks check box. Put a check mark in the check box to enable that feature.
7. If all or most of your employees have the same additional adjustments (such as insurance deductions, 401(k) deductions, or reimbursement for car expenses), click in the Item Name column in the Additions, Deductions, And Company Contributions box, and then click the arrow to select the appropriate adjustments.
8. Click the Taxes button to open the Taxes Defaults dialog and select those taxes that are common and therefore suited for the template. The State tab and the Other tab (usually local payroll taxes) contain tax data that probably applies to all or most of your employees.
9. Click the Sick/Vacation button to set the terms for accruing sick time and vacation time if your policy is similar enough among employees to include it in the template.
10. When you are finished filling out the template, click OK to save it.
Creating Employees
You’re now ready to add your employees to QuickBooks. Choose Employees | Employee Center from the menu bar. The details about how to work in the Employee Center can be found at the end of this chapter, but for now, start by clicking the New Employee button at the top of the window to add your first employee.
The New Employee form opens on the Personal tab (see Figure 20-4). This tab has several fields that not only allow you to enter basic data about your new hire, but also capture more detailed information that may be useful to track. For example, your state unemployment form may require you to note the gender of all employees; your medical or life insurance carrier may require the date of birth.
FIGURE 20-4 |
Start by entering personal information about the employee. |
You’ll also see additional tabs for the following categories:
• Address & Contact Here you can enter a primary address as well as multiple phone numbers, e-mail, and emergency contacts. Remember that an employee’s address is required to file W-2 forms.
• Additional Info Use this tab to enter an employee number (optional). This tab also contains a Define Fields button, so you can create custom fields to track such things as the date of an employee’s last raise or the name of a spouse or partner.
• Payroll Info This is where you enter information about earnings, taxes, and deductions (see Figure 20-5). If you’ve previously completed the default template, this tab will contain the employee’s payroll items and amounts already filled in from the default template. If you did not complete the template and the amount of the earnings or the deduction is the same every week, enter an amount. If it differs from week to week, don’t enter an amount here. Enter that information when you create the employee’s payroll check instead.
FIGURE 20-5 |
Enter information about this employee’s compensation and deductions. |
• Employment Info Enter information about the employee’s hiring date and other job details and assign an employment type. See “ProAdvisor Recommends: Understanding Employment Types” a bit later to learn more about using employment types in QuickBooks.
• Workers’ Comp This tracking feature is available only if you’ve signed up for either the Enhanced or Assisted Payroll service. When you use either one of these payroll services, the workers comp tracking feature is automatically enabled, but you can disable it in the Payroll & Employees Preferences (refer to Chapter 24 to learn more about setting Preferences in QuickBooks). Assign the workers comp code that applies to the employee, or select Exempt if this employee is exempt from workers comp.
Click the Taxes button to open the Taxes dialog, which starts with Federal tax information, as shown in Figure 20-6. Fill in any data that wasn’t automatically filled in from the employee template, and then modify data that is different for this employee.
FIGURE 20-6 |
Configure the employee’s tax information. |
Move to the State tab and configure the employee’s status for the state. QuickBooks has built in a great deal of state information and, depending on the state, you should see the appropriate withholdings and company-paid items. For example, states that don’t deduct SUI from employees have a check box for SUI (Company Paid), while states that collect disability funds from employees will display the appropriate check box.
On the Other tab, apply any local payroll tax that applies to this employee. If you haven’t already configured that tax in the Payroll Item List, you can click <Add New> in the Item Name column to enter it now. Click OK to save the tax status information and return to the Payroll Info tab.
Click the Sick/Vacation button and enter the hours and dates for this employee. When you are finished, click OK to return to the Payroll Info tab.
Click the Direct Deposit button to establish direct deposit of the employee’s paycheck to his or her bank account. If you haven’t signed up for direct deposit, the window that opens offers the chance to enroll. Click OK to save your selections and return to the New Employee form.
ProAdvisor RecommendsUnderstanding Employment Types
The Type field on the Employment Info tab of the New Employee form offers four choices. Because the selection you make can have an impact on the way your tax returns are prepared, you should check with your accountant if you have any questions about the type you should assign to any employee.
Regular Employee A regular employee is exactly what it seems to be: a person you hired for whom you deduct withholdings, issue a W-2, and so on. It’s a good idea to have every employee fill out a W-4 form every year even if nothing has changed from the last year. (If you need extra W-4 forms, you can download them from the IRS at www.irs.gov. Go to the forms section, select W-4, and print the form or download it and print as many copies as you need.)
Officer Employee An officer is someone who is an officer of a corporation. If your business isn’t incorporated, you have no officers. On federal corporate tax returns, you are required to report payroll for officers of the corporation separately from the regular payroll amounts. Selecting Officer as the type has no impact on running your payroll (calculations, check printing, and so on); it only affects reports.
Statutory Employee A statutory employee is someone who works for you that the IRS has decided qualifies as an employee instead of as an independent contractor. The list of the job types that the rules cover and the definition of independent contractor is the subject of much debate (especially in IRS audit hearings). The IRS has a list of criteria that must be met in order to qualify as an independent contractor (which means you don’t have to put that person on your payroll, you don’t have to withhold taxes, and you don’t have to pay employer taxes). The rules that govern this change frequently, so it’s important to check the rules in Circular E or with your accountant.
Owner Employee QuickBooks payroll won’t perform payroll tasks for any employee of this type. This employee type is appropriate if you own a company that is a proprietorship, because the money you pay yourself should be posted to an equity account called Owner’s Draw, or if the business is a partnership, which has multiple owners. In this case, the amounts paid to the owners are considered distributions.
Handling Year-To-Date Payroll Data
If you start using QuickBooks mid-year, you must enter the historical information about paychecks that have been issued thus far. This is the only way for QuickBooks to perform all of the required year-end tasks when the time comes—you cannot give your employees two W-2 forms: one from your “pre-QuickBooks” system and another from QuickBooks.
No matter what your fiscal year is, your payroll year is the calendar year. Even though you can start using QuickBooks payroll for the current period before you enter the historical data, remember that the absence of historical data may affect some tax calculations. Also, year-to-date payroll information on pay stubs for the employees will be incorrect until you enter historical payroll data. If there are withholding amounts that cease after a certain maximum (perhaps your state only requires SUTA/SUI for the first $7,500.00 in gross payroll), you’ll have to adjust the deductions on the current paychecks manually so that QuickBooks can calculate the maximum deduction properly and stop deducting these amounts.
ProAdvisor Tip: To make historical data entry easier, consider going live with payroll at the beginning of a calendar quarter.
Entering Year-To-Date Totals
The year-to-date payroll totals from before the QuickBooks payroll start date need to be entered into your QuickBooks company file. Here are some guidelines to help you understand how your QuickBooks payroll start date can affect this task:
• Historical payroll amounts need to be totaled and entered by quarter, because your 941 reports are due quarterly.
• You can’t enter summarized data for the quarter that’s current (the quarter your start date falls in). Instead, for the current quarter, you must enter data for each individual pay period (weekly, biweekly, semimonthly, or monthly). For previous quarters, you can enter quarterly totals.
• If your start date is any date in the first quarter, you have to enter historical data for each pay period, because you don’t have a full quarter to summarize.
• If your start date is in the second quarter, enter a quarterly total for the first quarter and then enter the individual pay period numbers for the second quarter, up to the go-live date.
• If your start date is in the third quarter, enter quarterly totals for the first two quarters and then enter each pay period up to the go-live date.
• If your start date is in the fourth quarter, you can follow the same pattern, but it might be just as easy to wait until next year to begin using QuickBooks payroll.
Manually Entering Payroll History in Batches
If you have already entered all your employees in QuickBooks, you can use a shortcut that launches a wizard for entering year-to-date payroll information. The wizard replicates the historical balance entry windows that the QuickBooks Payroll Setup wizard (covered in the next section) offers, but some people find this method easier to use, especially if they’ve chosen to set up their payroll manually.
1. Choose Help | About QuickBooks Pro 2014 to display the product information window. Then press CTRL-SHIFT-Y. The Set Up YTD Amounts wizard opens to walk you through the steps of entering year-to-date summary information for each employee (see Figure 20-7). Click Next to begin.
FIGURE 20-7 |
It’s important to know the correct dates needed to enter year-to-date payroll information. |
2. In the next two windows, the wizard asks you to specify three dates, as described next. It’s important to note that the dates you enter might not be the same for all three categories. See “ProAdvisor Recommends: Choosing the Correct Dates when Entering Year-To-Date Payroll.”
• The date your payroll liability and expense accounts are affected. In other words, When should the data you’re entering be posted to liability and expense accounts that are associated with payroll items?
• The date your payroll bank accounts are affected. In other words, When should the net paycheck amounts be posted to your payroll bank account?
• The check date of the first paycheck you’ll create using QuickBooks payroll. This paycheck posts to all relevant accounts; there are no historical balances. Click Next when you’ve entered this third date.
ProAdvisor RecommendsChoosing the Correct Dates when Entering Year-To-Date Payroll
Here’s an example of a scenario that should help you understand how to enter the dates in these categories. For the purpose of these examples, let’s assume you’re entering historical information as of the end of April 2014, and your first QuickBooks-produced paychecks will be Friday, May 2, 2014.
• Your first posting of liabilities and expenses should be April 1, 2014, because you would have already remitted the withholdings and employer contributions for the quarter ending March 31, 2014 (see Figure 20-7).
• Your first posting of bank account amounts should be May 2, 2014, the date of the first QuickBooks-produced paycheck (see Figure 20-7).
• Your “first paycheck using QuickBooks” date is your first payday in May. In this example, that day is May 2, 2014.
3. On the Employee summary information page, you’ll see your list of employees. Highlight a name and then click the Enter Summary button to open the YTD Adjustment window for that employee.
4. Enter the YTD amounts for wages and withholdings for each payroll period. Click OK after you’ve completed the entries for each employee. You’ll be brought back to the Employee summary information page in the Set Up YTD Amounts wizard.
5. Click the Leave button to close the Set Up YTD Amounts wizard.
Use the QuickBooks Payroll Setup Wizard
When you use the QuickBooks Payroll Setup wizard to set up your payroll, the setup process can take more time than it takes to perform those tasks manually, as described earlier in this chapter. But the wizard does have some advantages: It’s user-friendly with explanations throughout, and you can use it to set up all the components required for payroll including entering your historical data. It also has a Finish Later button that you can click if you have to do other work or you get tired or bored. When you open the wizard again, you pick up where you left off.
Regardless of whether you use the Payroll Setup wizard to set up all your components or to enter historical data only, be sure to set up all the vendors and accounts you need to remit payroll withholding and employer payroll expenses first.
To get started, choose Employees | Payroll Setup from the QuickBooks menu bar. The wizard window opens with all the tasks listed in the left pane (see Figure 20-8).
FIGURE 20-8 |
The QuickBooks Payroll Setup wizard is divided into logical sets of tasks. |
The first few screens are informational, indicating the data you need to complete the wizard (the same information about employees, payroll items, deductions, and so on, that were discussed earlier in this chapter). The real work starts with the Company Setup pages, where the wizard begins to guide you through the necessary details of your payroll setup.
Company Setup Section
In the Company Setup section, the wizard starts with compensation, which means payroll items for salary, hourly wages, bonuses, and so on. When you’ve finished with that section, the wizard moves on to other payroll item types.
If you’ve already created your payroll items manually, they appear in the wizard window, and you can click Edit to view or change the settings. If you haven’t yet set up payroll items, click Add New to open a mini-wizard that walks you through the process.
The types of payroll items the Company Setup section of the wizard helps to set up include the following:
• Types of compensation, such as salary, hourly wages, overtime, bonuses, commissions, tips, and so on.
• Benefits, such as insurance, pension, and so on. For each benefit you select, you configure the employee/employer contribution rates.
• Paid time off, such as sick leave and vacations. You can configure how QuickBooks calculates vacation time and sick time (if you let employees accrue time according to time worked).
• Other additions and deductions, such as workers comp, auto expense reimbursement, garnishments, union dues, and so on.
Setting Up Employees in the Wizard
After the Company Setup section, the wizard moves on to the Employee Setup section. If you didn’t set up your employees manually, you can add each employee in the wizard, moving through a series of windows in which you enter information about the employee’s personal information, pay structure, and tax status. For each employee, you designate the taxes and benefits that affect the employee.
When you finish entering employee information, the wizard displays the list of employees. If any employee is missing information, the wizard indicates the problem (if you entered your employees manually, the wizard automatically finds the employee records and displays the same list if problems exist).
Some missing information isn’t critical to issuing paychecks, but QuickBooks requires the information in the employee record. If any employee in the list has the notation Fix This Error Now, it means critical information is missing and the system either won’t be able to issue a paycheck or won’t be able to issue a W-2 form at the end of the year. Regardless of whether the missing information is critical or not, select the employee and click Edit to move through the wizard and fix the problem.
Incidentally, if you use the wizard to set up employees, when you fail to fill in required information, the wizard displays a reminder—something that doesn’t happen when you set up employees manually.
Setting Up Payroll Taxes in the Wizard
In the Taxes section, you tell the wizard about the federal, state, and local taxes you’re responsible for. These are payroll items, so if you haven’t set up all these items beforehand, you can use the wizard.
If you’re setting up your taxes in the wizard, as you finish each section, the wizard displays a list of all the taxes for that section. If you set up your taxes as payroll items manually, the wizard finds those entries and uses them to populate the list.
If the wizard finds anything amiss in your setup of any tax, the problem is displayed in the Description column. Choose Edit to make the needed changes.
Entering Payroll History in the Wizard
In the Year-to-Date Payroll section, you enter your historical payroll data. The wizard presents a set of windows, starting with a window that asks if you’ve issued paychecks this year (meaning outside of QuickBooks, of course). If you answer Yes, the next window displayed is the Payroll Summary window, where you have access to three preformatted tables into which you’ll enter the following year-to-date information:
• Paychecks (monthly totals for each employee)
• Payroll tax payments
• Nonpayroll tax payments (company contributions to benefits, and so on)
Click the Edit button next to each of these payroll categories to open the associated worksheet.
Running Data Review
Next is the Data Review section, which you can run if you choose. If you do, QuickBooks asks if you’d like to go over your payroll settings; if you select Yes, the wizard runs a payroll checkup routine.
ProAdvisor RecommendsRunning a Payroll Checkup
You can run a Payroll Checkup whenever you make changes to your payroll components (employees, taxes, and so on) by choosing Employees | My Payroll Service | Run Payroll Checkup. The QuickBooks Payroll Setup wizard walks through all the elements required for running payroll (a task list). Each section of the wizard’s task list is checked for errors. The errors the checkup may find include missing information, invalid information (the format of an EIN number or state reporting number may be incorrect), or any other data that doesn’t match the standards built into the QuickBooks payroll feature.
The program reports on the integrity of the data for prior quarters (unless you’re working in the first quarter, of course), and then, separately, the integrity of the data for the current quarter.
Then the program asks you about the federal and state forms you’ve filed to remit withholdings and pay employer taxes. After you’ve filled in the information, the program reconciles the totals against the payroll totals you entered previously. If it finds errors, the specifics are displayed, and you can correct the problem and rerun the checkup.
Finishing Up
At this point, your setup is complete, and from here you can click Finish or go straight to the Payroll Center, where you’ll have access to essentially everything that relates to managing your payroll.
Payroll Schedules
A payroll schedule is a way to create different payroll intervals. For example, if your company pays salaried employees and officers on a weekly basis and pays hourly workers on a biweekly basis, you can run payroll by selecting the appropriate schedule to make sure you pay the right employees on the right dates.
When you create a payroll schedule, you define how often you pay your employees: weekly, biweekly, or semimonthly, for example. You also define the pay period (the workdays covered by the paycheck), the date on the paycheck, and the date you prepare the payroll.
Caution: The date you prepare the payroll differs from the paycheck date if you’re using direct deposit, which requires you to transfer payroll information two days before the paycheck date.
Creating a Payroll Schedule
To create a payroll schedule, choose Employees | Add Or Edit Payroll Schedules. When the Payroll Schedule List window opens, press CTRL-N to create a new payroll schedule. In the New Payroll Schedule dialog, fill out the required information, as follows:
• A name for this schedule. Use descriptive text if you’re setting up multiple payroll schedules, such as “weekly-checks,” “weekly-DirDep,” “CommissionsOnly,” and so on.
• The pay period frequency for this schedule.
• The next pay period end date. This is the time period covered by the paycheck, which often is not the same as the paycheck date. For example, you may issue paychecks on Thursday for the period ending the previous Friday.
• The next paycheck date.
If your payroll is monthly or semimonthly, the dialog includes additional fields. For example, if you issue paychecks semimonthly, you can select specific dates, such as the 10th and the 25th, or you can select one midmonth date and then select Last Day Of Month for the second check in that month.
After you create the schedule, QuickBooks offers to assign the schedule automatically to any employees who are configured for the same pay frequency as the new schedule.
Assigning Payroll Schedules to Employees
Each employee record has a field for the applicable payroll schedule in the Payroll Info tab. When you link the payroll schedule to the appropriate employees, those employees appear when you select the schedule on the day you’re preparing paychecks.
Special Payroll Runs
QuickBooks offers a way to issue a paycheck, or multiple paychecks, outside of the schedules you create. When you choose Employees | Pay Employees, in addition to the subcommand Scheduled Payroll, you see two commands you can use for special payroll runs:
• Unscheduled Payroll Select this special payroll category if you need to create bonus checks, commission checks, or any other type of paycheck that differs from a regularly scheduled payroll run. You also have the option of adding the additional compensation to a “regular” paycheck instead of running an unscheduled payroll.
• Termination Check To use this option, you must first enter a Release Date in the Employment Info tab of the employee’s record. Be sure this release date is after the check date, because QuickBooks removes the name from the Enter Payroll Information window (which means that you can’t create a final paycheck for them) as of that date.
When you’re ready to create the check, select the terminated employee by placing a check mark in the column to the left of the employee name. Next, fill in the pay period ending date, the check date, the termination date, and the hours (or amount the employee is salaried). Click Continue, approve or change the paycheck details; then print the check, assign a check number for a manual check, or issue a direct deposit check.
Run Payroll
It’s payday. All the historical data is entered. It’s time to run the payroll. Begin creating payroll checks as follows:
• If you don’t use payroll schedules, choose Employees | Pay Employees | Unscheduled Payroll to open the Enter Payroll Information dialog seen in Figure 20-9.
FIGURE 20-9 |
Begin configuring paychecks in the Enter Payroll Information dialog. |
• If you have payroll schedules, choose Employees | Pay Employees | Scheduled Payroll to open the Employee Center with the Payroll tab selected (the Pay Employees function appears in the right pane). Select the appropriate schedule and click Start Scheduled Payroll to open the Enter Payroll Information dialog, which looks the same as Figure 20-9 but lists only the employees linked to this payroll schedule.
Select the employees to pay. If all the employees are receiving paychecks (the usual scenario), click Check All.
• For hourly employees who are configured for automatic payroll amounts using timesheets, the number of hours is prefilled.
• For hourly employees who are not paid from timesheets, you must fill in the number of hours for this paycheck.
Changing Paycheck Data
If you want to make changes to a paycheck, click the employee’s name to open the Preview Paycheck dialog. You can add a payroll item such as a bonus, assign the paycheck to a customer or job, or add a deduction such as a repayment of a loan or garnishment. Click Save & Next to move to the next employee or click Save & Close to return to the Enter Payroll Information dialog. (There’s also a Save & Previous button in case you think you should go back to a previous check.)
Reviewing the Payroll Run
Click Continue in the Enter Payroll Information dialog to display the Review And Create Paychecks window (see Figure 20-10), which displays all the financial information for this payroll run. If anything looks incorrect, click Back to reconfigure the paychecks or make other needed corrections.
FIGURE 20-10 |
The details for each paycheck have been entered. |
Fill out the options for producing the paychecks (print the checks or automatically assign check numbers in the bank account register for manual checks), and then click Create Paychecks. QuickBooks creates the checks and displays the Confirmation And Next Steps dialog.
If you’re printing paychecks, you can click Print Paychecks, or you can wait and print them by choosing File | Print Forms.
If you have direct deposit employees, click Print Pay Stubs. When the pay stubs are printed, click the Send Payroll Data button on the Confirmation And Next Steps dialog. This opens the Send Center window, and you can upload the direct deposit data to Intuit for processing. You can e-mail the pay stubs using the security standards built into the process (see the Help files for details).
If you have another payroll schedule to run today (perhaps both weekly and biweekly employees are paid today), repeat all the processes as outlined here.
ProAdvisor RecommendsNet to Gross Calculations for Enhanced Payroll Subscribers
If you subscribe to the Enhanced Payroll service, you can enter the net amount of a check and let QuickBooks calculate the gross amount. This is useful for bonus checks or another special payroll check for which you need to make sure the employee receives a net check of a certain amount.
During the payroll run (either a regular payroll or a special payroll for this individual paycheck), select the employee for this payroll run. In the Preview Paycheck window, select the option Enter Net/Calculate Gross, located in the lower-right corner, and then enter the net amount for this paycheck. QuickBooks automatically calculates the gross amount and the deductions to arrive at the net amount you entered.
The Employee Center
All the employee information you’ve entered and the payroll schedules and paychecks you’ve created are easily accessed via the Employee Center (shown in Figure 20-11). The Employee Center not only contains reporting information about your payroll, but it also provides links to all the functions in the payroll system. It’s a central location for everything you need to do or need to know.
FIGURE 20-11 |
The Employee Center is the repository of all payroll information and functions. |
To open this window, choose Employees | Employee Center from the menu bar.
ProAdvisor Tip: Users who do not have QuickBooks permissions to see payroll or other sensitive information do not see payroll financial information when they open the Employee Center.
If you subscribe to a QuickBooks payroll service, the left pane of the Employee Center contains three tabs: Employees, Transactions, and Payroll. If you don’t have a payroll plan subscription, the pane lacks a Payroll tab.
Employees Tab
When you select an employee on the Employees tab, QuickBooks displays information from the employee’s record on the top part of the right pane and displays transaction information for that employee on the bottom part of the right pane. You can change the choices in the Show and Date fields to filter the transactions information. Notice the three additional tabs located just above the employee transaction information. They allow you to add and manage To Do’s, Notes, and e-mails sent to an employee.
You can open any listed transaction by double-clicking its listing. For example, if you open a paycheck, you can see the original check along with a summary of the financial information. If you need to check any of the details, click Paycheck Detail to see all the calculated amounts.
Transactions Tab
The Transactions tab (see Figure 20-12) lists all payroll-related transaction types. Select a type to display the transactions you’ve created. You can use the Date field to narrow the range of the information displayed.
FIGURE 20-12 |
The Transactions tab lets you view transactions of the selected type. |
Payroll Tab
The Payroll tab provides a one-stop center for all your payroll tasks. At a glance, you can view upcoming liability payments (and those that may be overdue), create transactions, and generate the payroll forms you need. Visit this tab periodically to make sure you don’t miss any deadlines. The details behind how to pay, report, and remit payroll liabilities is covered in the next chapter.
Customizing the Employee Center
You can tailor the way the Employee Center displays information. Resize the panes by moving your mouse pointer over the edge of any pane; when the pointer changes to a vertical bar with right and left arrows, drag the pane in either direction. In addition, you can expand the pane to show the full list view by clicking the arrow button located at the top of the Employees tab. Use the same button to collapse the pane to show both the list and the detail panes.
You can customize the columns that QuickBooks displays in the left pane of the Employees tab by right-clicking anywhere on the list and choosing Customize Columns.
You can also customize the information displayed in the right pane when you select an employee’s name in the Employees tab or when you select a transaction type on the Transactions tab. Right-click anywhere in the right (Transaction) pane and select Customize Columns.
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