How To Do Payroll in QuickBooks
Using QuickBooks Payroll to pay employees is a great way to simplify the process of payroll management. Not only does QuickBooks accounting software store your records safely and give you access to past pay periods from any device (if using QuickBooks Online), but it can also give you tax penalty protection (if you subscribe to QuickBooks Online Payroll Elite).
Whether you are a business that already uses QuickBooks accounting software or are completely new to this software, learning how to do payroll in QuickBooks can make the process much easier and quicker for everyone involved.
How Do I Do Payroll in Quickbooks?
You've downloaded your version of QuickBooks and you're ready to start processing payroll. Now what?
Step 1: Go to Payroll and Choose a Subscription Plan If You Don’t Already Have One
Go to the dashboard on the left-hand side of the screen where you will see a Payroll tab.
You will need to add some information about your business, including details about employees' working hours, HR, where you and your employees are located, and other information.
You will then be asked to choose the subscription plan that best suits your business.
Which Is The Best Quickbooks Payroll Plan For My Business?
Choosing the right QuickBooks plan for your business depends on several factors, including the size of the business, how many additional users you want to have access to the software, and the features that you and your business need.
To make sure your account is set up correctly, accounting agencies can help you with the initial QuickBooks training and setup. Accounting for freelancers, for example, will naturally have different nuances than accounting for restaurants. Having a professional help with the initial set-up ensures that your QuickBooks subscription covers everything you need and nothing that you don’t.
After you sign up for your chosen monthly subscription to QuickBooks, you will have the option to select the QuickBooks Payroll add-on.
Step 2: Enter Year-to-Date Information
When you’re all set up with payroll, you will be asked if you have already sent out paychecks in the last calendar year. If this is the case, you will need to fill out your year-to-date payroll information to make sure that the data on your W-2 forms are complete.
Important note: While this step takes time, it’s essential to add this information now because it will save you a lot of potential problems during tax season and also prevent possible payroll tax penalties with the IRS. Set aside as much time as you need to do this now, remembering that you’ll ultimately be saving time by automating the process (from now on) with QuickBooks.
Step 3: Enter Payroll Information
After entering your year-to-date payroll figures, you will be prompted to enter the rest of your payroll information. This information includes:
The Date
When do you want to run payroll? Is it scheduled or unscheduled?
New Employee Information
In the instance that you’re setting up payroll information for a new employee, you will be asked to enter their information. This information is saved in the system, so you won’t need to enter it again.
Employee Status - State Residents
If your employees work in the same state as the company, they’re considered resident employees. Once the system’s set up, QuickBooks will withhold the relevant state income tax rates and state unemployment insurance automatically.
Employee Status - Out-of-State Employees
The process for setting up out-of-state employees in QuickBooks is more complicated. You will need to research how individual states handle non-resident payments. Fortunately, there is a growing pool of information available on this topic due to the sudden and dramatic increase in remote work during the COVID-19 pandemic.
Step 4: Input Other Employee Data
After entering the employees’ payroll information, you will then need to answer some other questions about how to run payroll in the future. This only needs to be done once as the information is saved and automated for all future transactions.
What Information Do I Need To Enter?
Personal Employee Information
First and last name, plus middle initial
Date of hiring in your company
Email address
Whether or not they enter their own hours
Whether or not you want the employee’s pay stubs and W-2s to be available to the employee online
Payroll Schedule
You can make this applicable to all or several employees, meaning you only have to enter this information once if the schedule is the same for all of your employees. You will need to enter:
The frequency of paychecks (fortnightly, monthly…)
The date of the next expected payday
The last workday of the upcoming pay period
The name of the pay schedule
Pay Rates
Nature of pay (hourly, salaried, commission…)
Pay rates
Any extra or other types of payment or benefits (overtime, PTO, sick pay, vacation pay)
Deductions (if or when applicable)
Healthcare
Flexible and healthcare spending accounts
Garnishments
Loan repayments
Withholdings
Information from an employee’s W-4
Social security number
Dependants
Other income, deductions, and withholdings
Payment Information
Employees may prefer to be paid in a variety of ways. QuickBooks can generate:
Direct deposit
Paper check
A combination of the two
Step 5: Double-Check and Generate Paychecks
It’s very important that you double-check the employees’ information before proceeding. To make sure you have inputted the information correctly, you can click Preview Payroll to see the details clearly.
If you are satisfied that everything is correct, you can do the final confirmation; select Submit Payroll. You will be asked to input hourly employees’ hours worked at this point. You can also print pay stubs in QuickBooks.
Step 6: Confirm
Once you click Submit Payroll, everything is done! A summary copy of each paycheck is then saved for your records.
What are the Advantages of Using QuickBooks for Payroll and Other Accounting Tasks?
Though simplifying the payroll process is the most attractive feature of QuickBooks Payroll, there are some additional benefits that come with a subscription.
Assistance Center
An online chat feature allows the user to troubleshoot problems with the software or its processes in real time.
Automation of Payroll Processes
After completing the payroll setup, the scheduled payroll is totally automated. Invoices and statements, reports, and monthly, bi-weekly, or weekly payments are all sent with minimal fuss.
Easy Access
QuickBooks Online is accessible from any computer or mobile device with an internet connection.
Safe Storage
Your business's details are stored safely on the Intuit servers (if using QuickBooks Online).
Tax Penalty Protection
Payroll can get complicated and mistakes are sometimes made. A QuickBooks Online Payroll Elite subscription provides IRS tax penalty and interest protection to a value of $25,000 a year in the case that you receive an IRS penalty for a payroll tax error.
Why Use Computer Software To Do Payroll?
For many small business owners, payroll is a complicated task that requires a high degree of precision and care. Software such as QuickBooks ensures that everything is calculated correctly and helps to prevent mistakes.
On the legal front, tax regulations and laws continue to change, and if you have out-of-state employees, it’s almost impossible to stay abreast of all of the latest rules and regulations. If your budget doesn’t allow for a dedicated small business accountant, QuickBooks Payroll (along with professional third-party accounting advice) can help to fill the gap.
What Other Benefits Does QuickBooks Payroll Offer?
QuickBooks, alongside the Payroll add-on, is an easy-to-use, automated payroll software system that allows you to pay your employees regularly, fairly, and accurately. After adding employee information once, QuickBooks Payroll calculates everything you need; including automated tax calculations, employee benefits, local and state taxes, and payroll taxes.
If you are a modern business with out-of-state salaried employees—such as a company based in Jacksonville, Florida that has employees in Charlotte, North Carolina—QuickBooks can also help you process your employees' paychecks correctly. QuickBooks also allows you to use each employee’s chosen payment method; you can use this software to create direct deposit checks or paper paychecks and later send them for processing.
QuickBooks Desktop vs QuickBooks Online for Payroll
You've decided to use QuickBooks in your business; now which version should you choose?
QuickBooks Desktop
At a glance, QuickBooks Desktop is a more traditional accounting software that is downloaded onto your PC or laptop. This version doesn't require internet access to function but can only be accessed from the device onto which you downloaded the program.
QuickBooks Online
QuickBooks Online is a dynamic and modern cloud-based version that offers more flexibility for businesses needing access on the go. It is also a more budget-friendly option that allows for additional users to be added to the account.
Which Should You Choose?
The Desktop version costs more upfront but offers some advanced features that QuickBooks Online doesn't. On the other hand, QuickBooks tax protection only comes with a QuickBooks Online Elite subscription and isn’t available with QuickBooks Desktop.
Ultimately, the best solution for your payroll needs will depend on the size and structure of your business and the precise payroll features you need.
Streamline Your Small Business Accounting with QuickBooks Payroll
QuickBooks Payroll is a useful piece of software for business owners who want a quick and cost-effective payroll solution. By following the steps outlined above, your business can avoid costly payroll mistakes and free up time for activities that help you grow your business.
If you have any questions about payroll or any other accounting matters, it is always best to consult an accounting professional who can advise you about legal matters and best practices. A QuickBooks Elite ProAdvisor can also provide QuickBooks training to help your team use this software to its full advantage.
