Chapter 21
Tracking and Remitting Payroll Liabilities
In this chapter:
• Confirm payroll liability payment schedules
• Pay liabilities
• Prepare quarterly and annual returns
• Print W-2 forms
• Work with payroll data in Excel
There’s a logical order to all the tasks involved in reporting on and paying your payroll liabilities using QuickBooks, although the steps may differ depending on the state and municipality you’re in. These tasks, and the order in which most businesses have to perform them, are covered in this chapter.
Confirm Payroll Payment Schedules
When you run payroll, QuickBooks maintains a payment schedule behind the scenes that keeps track of the amounts and due dates for all the payroll liabilities and employer expenses that are accumulating. You’ll use this payment schedule to make sure you remit your payroll obligations on time. Most of the information required for scheduling payments is probably already in your system as a result of the information you provided when you set up payroll items. To view the schedule and correct any problems, choose Employees | Payroll Taxes And Liabilities | Edit Payment Due Dates/Methods.
This opens the Payroll Setup wizard’s Tax Payments window. As you move through each page, if any data is missing or does not match the content or format the payroll system expects, the wizard highlights the listing with a problem icon (see Figure 21-1).
FIGURE 21-1 |
If an item listed has a problem icon, an error needs to be fixed. |
Double-click the problem listing so you can edit it and fix the problem. QuickBooks usually provides a hint about the problem in the window that opens. In Figure 21-1, for example, the problem with the two listings is the format of the account numbers for state unemployment and withholding in California. QuickBooks knows that the account number has to follow a specific format, and this data was originally entered in the wrong format.
Report and Remit Payroll Liabilities
When you create payroll checks, QuickBooks tracks the taxes that are due as liabilities. To see your scheduled liabilities, choose Employees | Payroll Taxes And Liabilities | Pay Scheduled Liabilities. The Pay Liabilities tab in the Employee Center shows the list of taxes and other liabilities currently owed (see Figure 21-2).
FIGURE 21-2 |
QuickBooks tracks your payroll liabilities automatically. |
Select the liability you want to pay and click the View/Pay button. The first time you pay liabilities, QuickBooks asks you to select the appropriate bank account (if you have more than one bank account).
The Liability Payment transaction window opens, as seen in Figure 21-3. Continue to view and pay until all the current liabilities are remitted.
FIGURE 21-3 |
This liability check is posted to the appropriate account and is ready to print. |
Federal Tax Liabilities
Payments to the federal government involve two payroll taxes:
• 941/944/943 taxes, which cover withholding, Social Security, and Medicare
• 940 taxes, which are the federal unemployment taxes
941/943 Payments
The federal government requires you to report on and remit the withheld amounts, along with the matching employer contributions, at a specified time. That time period is dependent upon the size of the total withholding amount you’ve accumulated. You may be required to remit monthly, semimonthly, weekly, or within three days of the payroll. Check the current limits with the IRS or your accountant.
There’s a formula for determining the size of the 941/943 payment—it’s the sum of the following amounts for the period:
• Federal withholding
• FICA withholding
• Medicare withholding
• FICA matching contribution from employer
• Medicare matching contribution from employer
You don’t have to do the math—QuickBooks does it for you. But it’s a good idea to know what the formula is so you can check the numbers yourself and make sure you have sufficient funds in your bank account to cover the next payment.
In addition, the IRS requires that you remit your payments electronically, either through QuickBooks Enhanced Payroll or by using the Electronic Federal Tax Payment System (EFTPS) operated by the IRS; the payee is the US Treasury. If you haven’t already done so, you’ll need to go to the EFTPS website (www.eftps.gov) to learn more and enroll. If, however, your employment taxes for a quarterly period are less than $2,500, you can remit the taxes with your quarterly (Form 941) return in lieu of depositing them.
Creating a 941/943 Form
Unless you’ve been notified that you’re a Form 944 filer (where your annual payroll withholding liability is less than $1,000/year), you must file a 941 or 943 form every quarter to report the total amount you owe the federal government for withheld taxes, FICA, and Medicare. If you have been making your deposits regularly and on time, no amount is due with the 941/943.
• If you underpaid, you can use the EFTPS system to remit your payment for the underpaid amount or remit the underpayment with your form. The vendor for the check entry you make in QuickBooks is the United States Treasury.
• If you overpaid, you can select the option to take a credit toward the next 941/943, or you can select the option for a refund.
QuickBooks will prepare your 941/943 report using the information in your QuickBooks payroll registers. If QuickBooks isn’t preparing your federal forms (either because you’re doing payroll manually or you subscribed to the QuickBooks Basic Payroll service), you can prepare your forms manually with the use of Excel worksheets that QuickBooks provides. See the section “Tax Form Worksheets in Excel” at the end of this chapter. Creating the form is quite easy.
Follow these steps to create a 941/943 form:
1. Choose Employees | Payroll Tax Forms & W-2s | Process Payroll Forms. The Payroll tab in the Employee Center opens to show the list of tax forms available for filing.
2. Select Federal Quarterly Form 941/Sch B – Employer’s Quarterly Federal Tax Return (or Federal Quarterly Form 943A – Employer’s Annual Federal Tax Return for Agricultural Employees) and click the File Form button. The File Form window opens.
3. Select the Filing period. You can also click the Auto-Fill Contact Info button to have QuickBooks automatically copy the contact information you provide in this window to future tax forms you need to complete. Click OK.
4. The Payroll Tax Form window opens to the form selected (see Figure 21-4). The first window is an interview; enter the appropriate data, and click Next to continue.
FIGURE 21-4 |
Start by answering questions; the answers are transferred to the form in the appropriate places. |
5. Use the guidelines presented in the following sections to move through the wizard.
Filling In Blank Fields
To enter information in a blank field, click your cursor in the field to activate it, and then type the data. The typed text appears in blue, but that’s just a signal to you that the data was entered manually; QuickBooks doesn’t print the form in color.
Editing Prefilled Data
Follow these steps to edit data:
1. Right-click the field and choose Override from the menu that appears.
2. Enter the replacement data in the override box and press the TAB key.
3. The new data replaces the original data in the field, and the text is green (to remind you that you manually replaced the data that was exported from QuickBooks).
If you change your mind and decide that the data automatically supplied by QuickBooks should remain in the form, right-click in the field and choose Cancel Override.
Data You Cannot Change
Do not edit the following types of data on the Form 941 (or on any payroll tax form for that matter):
• Federal Employer Identification Number (EIN)
• Filing period (if you’re trying to change the filing period, start the process again and select the appropriate date range)
• Totals (these are calculated by QuickBooks; if a total is wrong, edit the erroneous number and QuickBooks will recalculate the total)
Checking for Errors
Before you finalize the contents of Form 941/943, click the Check For Errors button. QuickBooks examines the content and displays any errors in the Errors box that opens at the top of the form. If there aren’t any problems, the Errors box reports this, too.
Click any error to move automatically to the field that’s causing the problem, and then correct the information.
• If the problem is in a field you filled out, correct the data and press the TAB key.
• If the problem is in a field that was prefilled but you changed the content by overriding the data, right-click the field and select Cancel Override.
When you press TAB to replace the data in the field, the error listing should disappear from the Errors box. If it doesn’t, you have to do some homework to figure out what’s wrong with the data in the affected field and then correct it.
When the error is fixed, you can close the Errors box by clicking the Close Errors button.
Saving and Reopening an Unfinished Form
If you get interrupted or confused while you’re preparing your 941, 943, or 940 form, you can save the form with the data you already filled in, so you don’t have to start from scratch when you resume your work. Click Save And Close to save the form with its current contents. To return to work on the saved form, you’ll need to open the form again following the steps from the previous section, again selecting the form and a date range. QuickBooks asks if you want to use the saved draft.
Keep in mind that when you open a saved draft, QuickBooks does not refresh the form with your QuickBooks payroll data. So if you made changes, you’ll have to start a new form instead of opening a saved draft. Changes could include an additional paycheck being issued within the date range for some reason or a payment you made the IRS as a remittance for this report period.
Printing or Submitting Form 941/943
You can print the form from QuickBooks, save it as a PDF, or submit the form electronically. If you choose to print, be sure to use these printing criteria:
• The form must be printed with black ink on white or cream-colored paper.
• The paper size must be 8.5-by-11 inches.
• The paper must be 20-pound weight or heavier.
ProAdvisor RecommendsUsing the 944 Form for Payroll Liability Reporting
If your annual payroll withholding liability is less than $1,000 per year, you may be eligible to file Form 944—a simplified version of the 941 form. If you were notified by the IRS that you should file Form 944 instead of Form 941, follow the instructions in the previous sections to open the federal form list and select Form 944. You can remit your liabilities when you send the form, or, if you wish, you can make deposits against your 944 liability by using the deposit coupon (8109), filling in the circle for Form 944, and taking the check to the bank.
You cannot use Form 944, even if you qualify financially, unless you’ve been notified by the IRS that you are a Form 944 filer. This form is shorter than Form 941, has no additional schedules, and has an annual filing frequency, all of which combine to make this a desirable filing method. If you think you qualify financially but you didn’t receive a notification to use Form 944, you can contact the IRS to request a notification at www.irs.gov.
The printed report doesn’t look exactly like the blank form you received, but it’s close. More importantly, it’s perfectly acceptable to the government. Print two copies: one to mail and one for your files.
If you’ve set up for e-filing with your QuickBooks Payroll subscription, click the Submit Form button to file your 941/943 electronically. If you have not set up this form for e-filing, open the Employee Center and click the Payroll Tab to open the Payroll Center. Then click the File Forms tab and click Start Filing Electronically in the Other Activities area. (If you’ve already chosen e-file for any form filing, click Manage Filing Methods instead.)
940 Payments
The Federal Unemployment Tax Act (FUTA) provides unemployment compensation to workers who have lost their jobs, usually after the workers’ state benefits have been exhausted. The FUTA tax is paid by employers; no deductions are taken from employee wages. Companies must make FUTA payments if either of the following scenarios exists:
• During this year or last year, you paid wages of at least $1,500 in any calendar quarter.
• During this year or last year, you had one or more employees for at least part of a day for a period of 20 weeks (the weeks do not have to be contiguous).
You don’t have to make the deposit until you owe the entire amount, but you can make deposits until you reach that amount if you wish.
Currently, the FUTA tax is 6 percent of gross wages up to $7,000 per employee, but the federal government gives employers up to a 5.4 percent credit for paying their state unemployment taxes. So if you’re entitled to the maximum 5.4 percent credit, the FUTA tax rate after the credit is 0.6 percent. QuickBooks assumes you’re paying your state unemployment taxes and calculates your FUTA liability accordingly.
Preparing the 940 Form
The 940 form (FUTA) is filed annually; there are no quarterly forms to file. To create your Form 940, follow these steps:
1. Choose Employees | Payroll Tax Forms & W-2s | Process Payroll Forms. The Payroll tab in the Employee Center opens to show the list of tax forms available for filing.
2. Select Annual Form 940/Sch A – Employer’s Annual Federal Unemployment (FUTA) Tax Return. Click the File Form button. The File Form window opens.
3. Select the Filing period. You can also click the Auto-Fill Contact Info button to have QuickBooks automatically copy the contact information you provide in this window to future tax forms you need to complete. Click OK.
4. The Payroll Tax Form window (it’s the first window of a wizard) opens with the Form 940 Interview displayed. The top section of the interview window asks about your state and federal unemployment payments. Below that section is a series of questions aimed at determining whether any of your payroll expenses covered exempt payment types. Exempt payments are wages you paid that are exempt from FUTA taxes. QuickBooks checks your payroll items to track several categories of exempt payments, and if you’ve used these payroll items, QuickBooks fills in the amounts. If you had any exempt payments that are not in the payroll items that QuickBooks automatically checks, fill in the amount directly on the appropriate field. Check the IRS rules for preparing Form 940, or check with your accountant. You can also get more information about this form by clicking the link “View details about this form” located at the bottom of the Payroll Tax Form window.
5. Click Next to see the form itself. Fill out any fields that aren’t automatically prefilled by QuickBooks from your payroll records. Continue to click Next and follow the instructions that appear on the screen.
State and Local Income Taxes
Your state and local payroll liabilities vary depending upon where your business is located and where your employees live (and pay taxes). Besides income taxes, you may be liable for unemployment insurance and disability insurance.
Most states have some form of an income tax, which might be calculated in any one of a variety of ways:
• A flat percentage of gross income
• A sliding percentage of gross income
• A percentage based on the federal tax for the employee
Local (municipal or county) taxes are also widely varied in their approach:
• Some cities have different rates for employees of companies that operate in the city. There may be one rate for employees who live in the same city and a different rate for nonresidents.
• Your business might operate in a city or town that has a payroll head tax (a once-a-year payment that is a flat amount per employee).
QuickBooks Enhanced Payroll supports most state forms. State and local taxing authorities also provide coupons or forms or an online service for remitting income tax withholding. The frequency with which you must pay might depend on the size of your payroll, or it might be quarterly, semiannual, or annual, regardless of the amount. Some municipal authorities have e-pay available.
Other State Liabilities
If your state has SUI (state unemployment insurance) or SDI (state disability insurance) or both, you have to pay those liabilities when they’re due. Commonly, these are quarterly payments.
ProAdvisor Tip: It’s a good idea to create different vendor names for SUI, SDI, and state income tax withholding to make sure you don’t accidentally send checks for the wrong component and to prevent QuickBooks from issuing a single check for the grand total. The vendor record for each vendor name may have the same payee (State Department of Revenue), but the vendor names are different.
Not all states have SUI or SDI, and some have one but not the other. Some states collect SUI and SDI from the employee and the company; some collect only from the company. Check the rules for your state.
Other Non-Tax Payroll Liabilities
The rules for remitting the paycheck deductions and employer contributions for other reasons—such as health benefits, pension, and workers compensation—are specific to your arrangements with those vendors.
There are many ways to handle how these payments are posted, and you have to decide what makes sense to you (or to your accountant). For example, if you pay a monthly amount to a medical insurer, you may want to post the employee deductions back to the same expense account you use to pay the bill. That way, only the net amount is reported as an expense on your taxes.
To remit liabilities that are not a Scheduled Liability in QuickBooks, you can use the Unscheduled Liabilities window. Choose Employees | Payroll Taxes And Liabilities | Create Custom Liability Payments. Select the paycheck date range you need, and then select the liability you want to remit.
Workers Comp
QuickBooks Enhanced and Assisted Payroll offerings include workers comp, and the setup options are available in the Payroll & Employees category of the Preferences dialog. Click the Workers Compensation button on the Company Preferences tab to open the Workers Comp Preferences dialog. Select Track Workers Comp to enable the feature.
When workers comp is enabled, you can also opt to see reminder messages to assign workers comp codes when you create paychecks or timesheets. In addition, you can select the option to exclude an overtime premium from your workers comp calculations (check your workers comp insurance policy to see if you can calculate overtime amounts as regular pay).
Prepare W-2 Forms
On or before January 31, you must print and send W-2 forms to your employees for the previous calendar year. And by February 28, you’ll need to send or e-file copies to the appropriate government agencies as well.
When you run your payroll in QuickBooks, this process is very straightforward. You start by selecting the form and the employees, and then move to the process of creating and printing or electronically sending the forms.
Here are the step-by-step instructions:
1. Choose Employees | Payroll Tax Forms & W-2s | Process Payroll Forms. The Payroll tab in the Employee Center opens to show the list of tax forms available for filing.
2. Select Annual Form W-2/W-3 –Wage And Tax Statement/Transmittal. Click the File Form button. The File Form dialog opens.
3. Select the filing period and the employees for which you want to process W-2 forms. You can also click the Auto-Fill Contact Info button to have QuickBooks automatically copy the contact information you provide in this window to future tax forms you need to complete. Click OK.
4. The Select Employees For Form W-2/W-3 window opens, listing all your employees that have received a paycheck during the year (see Figure 21-5). By default, all employees are selected and the current status of the W-2 printing process is noted.
FIGURE 21-5 |
Confirm or change the employees that should receive a W-2. |
5. Click Review/Edit to display the first page of the Payroll Tax Form window (shown in Figure 21-6), which explains the steps you’ll go through as you step through the wizard. Click Next to move through the wizard.
FIGURE 21-6 |
The first page of the Payroll Tax Form window will guide you through the preparation of your W-2 and W-3 forms. |
6. In the screens that follow, each employee’s W-2 form is presented. If any nonfinancial data is missing (such as an address or ZIP code), you must fill it in. If prefilled information is incorrect, right-click the appropriate field and select Override. Enter the correct information, and press TAB to add that information into the field.
Caution: Changes you make to nonfinancial information are not written back to the employee record. You must make the same changes there.
7. Click the Check For Errors button to see if anything is amiss on any employee’s form. If errors appear in the Errors box at the top of the form, click the error’s listing. QuickBooks automatically takes you to the appropriate field to correct the information.
8. When everything is correct, load your W-2 forms in the printer (even if you’re e-filing, you’ll likely be printing the copy that goes to the employee) and click Submit Form to open the Print/E-file Form dialog.
9. If you enrolled in an agency’s e-filing program, have an active Enhanced Payroll subscription, and there are no errors on the form, the option to e-file these forms will be available to you. Otherwise, only the Print button will be active. Select the option to open the Print W-2 And W-3 Forms window.
10. Click Print when all of these settings are just the way you want them. You must also print or e-file the W-3 form, which is a summary of your W-2 forms.
ProAdvisor Tip: You can make your employees’ W-2 forms available online at no extra charge if you have a QuickBooks payroll subscription. Using this service eliminates the need for you to print and mail W-2 forms to your employees since they can view and print their own W-2 information directly from an Intuit website called ViewMyPaycheck.com. Also, if your employees use TurboTax to prepare their own personal tax returns, they can view and download their W-2 forms directly into TurboTax. To learn more about this service, click the “Tell me more” link at the bottom of the Print W-2 And W-3 Forms window.
Tax Form Worksheets in Excel
If QuickBooks isn’t preparing your payroll forms (either because you’re doing payroll manually or you subscribed to the QuickBooks Basic Payroll service), you can prepare your forms manually with the use of Excel worksheets that are available from QuickBooks.
To access the worksheets, choose Reports | Employees & Payroll | More Payroll Reports In Excel | Tax Form Worksheets. Because this Excel file has macros, depending on how you’ve configured Excel’s security options, you might have to tell Excel to let the macros run.
When the QuickBooks Tax Worksheets dialog appears, select the form and filing period you need. Next, click the Options/Settings button to open the QuickBooks Tax Forms Workbook – Options/Settings dialog, where you’ll configure the report using the guidelines discussed in the following sections.
Configuring Worksheet Headers
By default, the option to update worksheet headers is checked. This means that the header of a printout of the worksheet contains the company name and address information, as well as the date range of the report (the date range you selected in the previous dialog). If you are planning to print the report, it’s important to know the date range, so make sure this option is selected.
Configuring the Level of Detail
By default, the Hide Detailed Data Returned From QuickBooks option is selected, which means that the workbook displays only the information connected to the report you selected.
If you deselect the option to hide detailed data, QuickBooks adds a second worksheet named Data to the workbook, as shown in Figure 21-7. This worksheet contains detailed information about the employees, the payroll items, and the job-costing links (if you use timesheets to do job costing for payroll) on separate rows.
FIGURE 21-7 |
See the details behind your report totals. |
Forcing an Alternate Connection Method
Microsoft Office 2010 products are available in both 32-bit and 64-bit versions. If you are using a 64-bit version of Excel (which is included in Office 2010), the Force Alternate Connection Method Provided For Excel 84-Bit option (located on the QuickBooks Tax Forms Workbook – Options/Settings dialog) should be checked to complete the export.
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