Payroll Processing

Payroll Processing Chapter 7

Objectives • Update your Payroll Tax Tables • Create Paychecks and override default calculations • Edit, Void, and Delete Paychecks • Pay Payroll Liabilities • Adjust Payroll Liabilities • Create Payroll Reports • Prepare Payroll Tax Forms 941, 940, W-2s, and reports to help you prepare your State payroll tax returns 223

Payroll Processing Checklists • Every Payday: • Verify that your payroll setup is correct • Verify that your tax tables are current and update them if necessary • Create, review, and correct (if necessary) paychecks • Print paychecks and pays stubs • Every Tax Deposit Due Date: • Create, review, and correct (if necessary) liability payments • Print liability payment checks 223

Payroll Processing Checklists (Contd.) • Every Quarter: • Verify the accuracy of all payroll transactions for the previous quarter • Create payroll reports for the previous quarter and year-to-date • Create payroll tax returns (Federal Form) • Every January: • Verify the accuracy of all payroll transactions for the entire previous year • Create payroll reports for the previous quarter and year-to-date • Create payroll tax returns (Federal Form 941, 940, and State Quarterly and Yearly Returns) 223

Payroll Tax Table • Payroll Tax Tables include the tax rates necessary to calculate an employee’s paycheck • This calculation affects the amounts of taxes that are withheld from an employee’s check (e.g., Federal and State income tax) as well as the amounts of taxes the company must pay for the employee (e.g., Federal and State Unemployment tax) • The Payroll Tax Table also includes data that updates the forms that print directly from QuickBooks (e.g., 940, 941, and W-2) 224

Updating Payroll Tax Tables • Select the Employees menu, then select Get Updates, and then select Get Payroll Updates • If you have a payroll subscription, you can connect to the Internet and download the tax tables by clicking Update 224

Paying Employees • Once the payroll setup is complete, and you have downloaded the latest tax tables, you are ready to process payroll by using the following: • Selecting the Employees to Pay • Calculating Paychecks for Hourly Employees • Calculating Paychecks for Salaried Employees • Printing Paychecks • Printing Pay stubs 226

Selecting the Employees to Pay • Select the Employees menu and then select Pay Employees • A warning may appear if you have not processed any payroll or entered Year to date information for employees yet this year • If you have not installed the payroll update, QuickBooks may ask you to update your payroll subscription 226

Paycheck for Hourly Employee 229

Calculating Paychecks for Hourly Employees • If the employee was set up to Use Time Data to Create Paychecks QuickBooks will fill in the earnings section of the paycheck with data entered in the Weekly Timesheet • To manually allocate an employee’s wages to each of the jobs and classes that they worked on, enter a separate line for each combination of Earnings Item, Rate, Hours, Customer:Job, and Class • In the Other Payroll Items section, QuickBooks adds the Additions, Deductions, and Company Contributions as defined in this employee’s record • If you are doing manual payroll, you will need to manually enter the Federal and State taxes in the Employees Summary and Company Summary section 229

Calculating Paychecks for Salaried Employees • With salaried employees, QuickBooks calculates the total gross pay for the period (annual rate divided by the number of pay periods) and then divides that amount equally into each of the Earnings Items listed in the Earnings Section • To track sick and vacation hours used, enter the number of hours for each on separate lines in the earnings section • QuickBooks pro-rates the total salary amount to each line according to the number of hours on that line 234

Printing Paychecks • Select the File menu, select Print Forms, and then select Paychecks • All the unprinted paychecks show in the Select Paychecks to Print window • Select the checks to print and enter the checknumber in the First Check Number field • Select Voucher check style so that QuickBooks can print the pay stub information on the voucher portion of the checks 236

Printing Paystubs • If you don’t use voucher checks or if you don’t print checks from QuickBooks, you can still print paystubs for your employees on blank paper • Select the File menu, then select Print Forms, and then select Paystubs 239

Editing, Voiding and Deleting Paychecks • If you find errors on paychecks, you can edit, void, or delete the paychecks • However, be careful when you do any of these actions because changing transactions may adversely affect your records • When in doubt, ask your accountant 240

Editing Paychecks • If you haven’t printed the paycheck, you can edit the paycheck directly in the register • From the Employeesmenu, select Edit/Void Paychecks • Set the from and to dates and then select the paycheck from the list to edit • To edit the items on the paycheck, click Paycheck Detail 241

Replacing Lost or Stolen Checks • Find the check in the Checkingaccount register: • Double-click to edit the check • Click the To be printed box in the Paycheck window to deselect it • Click Save & Close and then Yes to save your change • Reprint the check and then give it a new check number • Enter a new check directly in the Checkingaccount register with the same date, payee, amount, and check number as the lost check, coding it to the Miscellaneous Expense account • Void the new check you just created • This converts the check into a voided check with the same date, payee, amount and check number as the lost or stolen check 243

Voiding Paychecks • If you need to void a paycheck, make sure it’s the most recent paycheck for this employee otherwise QuickBooks would not be able to recreate the check exactly as the original • Before you edit or void old paychecks, make a backup of your file • Select the Employees menu and then select Edit/Void Paychecks: • Enter dates • On the list of paychecks, select the paycheck you want to void • Click Void 244

Deleting Paychecks • The only time you should delete a paycheck is when you created it in error and you haven’t printed the check, otherwise, you should void the paycheck so you can keep a record of it • From the Employees Navigator, select Edit/Void Paychecks: • Set the dates • On the list of paychecks, click the paycheck you want to delete and then click Edit • At the top of the QuickBooks Company window, select the Edit menu and then select Delete Paycheck (or press CTRL+D) and press OK 422 245

Paying Payroll Liabilities • You must use the Pay Liabilities window to record liability payments: • From the Employees menu, select Process Payroll Liabilities, and then select Pay Liabilities • The Pay Liabilities window is similar to the Pay Bills window, but it only shows Payroll Liabilities: • Each Payroll Item shows along with the balance due • Set the Check Datefield • Select the Payroll Items to be paid • As with bill payments, QuickBooks adds all of the payments to the same vendor (PayableTo column) onto one check • Click Create 246

Editing a Liability Payment • You can edit an existing liability payment, if you haven’t yet submitted the payment to the tax agency • If you have submitted the payment to the tax agency, you should use the Adjust Liabilities window instead of editing the payment • Select the liability payment in the account register and click Edit Transaction • The liability payment is displayed as when first created • Edit any of the fields on the Payroll Liability Check and then click Save & Close 250

Printing Payroll Liability Checks • Select the File menu, select Print Forms, and then select Checks • If you pay your liabilities electronically, for example with EFTPS (Electronic Federal Tax Payment System), don’t print those checks, instead, change the check number in the register to “EFTPS,” or to the last 11 digits of the approval code given to you by the EFTPS system 251

Adjusting Payroll Liabilities • If your payroll liabilities need adjusting, you can use the Liability Adjustmentwindow • To avoid significant tax penalties, when you adjust payroll liabilities you must fully understand all the accounting and tax implications of the adjustment • Select the Employees menu, then select Process Payroll Liabilities, and then select Adjust Payroll Liabilities • Use positive numbers to increase the balance of the Payroll Item and negative numbers to reduce the balance of the Payroll Item 251

Creating Payroll Reports • There are several reports that you can use to analyze your payroll • Payroll Summary Report • Sales Rep Commissions • Payroll Liabilities Report 253

Payroll Summary Report • The Payroll Summary report shows columns for each employee, along with their hours and rates of pay • Select the Reports menu, then select Employees & Payroll, and then select Payroll Summary • If you want to see more employees on a page, you can customize this report not to show the Hours and Rate columns 253

Sales Rep Commissions • If you pay commissions to your employees, you can create a Sales by Rep Summary or Sales by Rep Detail report to help calculate the commissions due • Select the Reports menu, then select Employees & Payroll, and then select Sales by Rep Summary • This report requires you to first tag each sale with the employee who gets credit 255

Payroll Liabilities Report • The Payroll Liabilities report is used to track the status of your payroll liabilities by Payroll Item • From the Reportsmenu, select Employees & Payroll, and then select Payroll Liability Balances • If the Take The Hassle Out Of Payday window appears, click the Do not display this message in the future box and click No 255

Preparing Payroll Taxes • If you signed up for one of the QuickBooks Payroll Services, upgrade your tax tables before processing Forms 941, 940 or W-2s • Be sure to use the Pay Liabilities window to create your tax payments prior to creating your Quarterly and Annual Payroll Forms: • The 941 will use these payments for the Deposits made calculation • The 940 form computes your Federal Unemployment tax based on the 940 contributions, your State Unemployment liabilities, and payments made throughout the year (if applicable) • All of the payroll tax forms calculate automatically using the information on Paychecks and Payroll Liability Payments 261

Processing Form 941 and Schedule B • To prepare the Federal quarterly payroll tax return (Form 941), follow these steps: • From the Employees menu, select Process Payroll Forms • Select Federal form radio button • Select Quarterly Form 941/Schedule B – Interview for your Form 941/Schedule B in the Choose a form you want to use: section • Select This Calendar Quarter in the Select Filing Period section and set the Quarter Ending, click OK • QuickBooks opens the Payroll Tax Form window titled Interview for your Form 941/Schedule B • Read the entire instructions and check the boxes that refer to your own company 261

Processing Form 940 or 940-EZ • QuickBooks prepares Form 940 and Form 940-EZ (a simplified version of Form 940) that are used to report the annual FUTA tax • Employers who meet certain conditions are able to use 940-EZ • The process for creating Form 940 or 940-EZ is nearly the same as for Form 941 • The IRS requires that you pay Form 940-EZ taxes separately than the Form 941 taxes • You’ll also print Form 940-EZ on blank paper suitable for filing with the IRS 268

Processing W-2s • From the Employees Navigator, select Process Payroll Forms • Select AnnualForm W-2 – Wage Tax Statement in the Choose a form you want to use: section • QuickBooks displays the Process W-2swindow, select the Year • On the Process W-2s window, select all of the employees you want to review and then click Review W-2s • After you reviewing the W-2s, Click Print W-2s on the Process W-2s window 272

Creating Reports for Preparing State or Local Payroll Taxes • QuickBooks will prepare state tax forms when you subscribe to their Enhanced Payroll service: • However, it does not prepare state tax forms for all states • Select Process Payroll Forms from the Employees Navigator, and then select State form from the Select Form Type window • If you do not subscribe to QuickBooks Enhanced Payroll service you can create reports such as the Employee State Payroll Taxes Detail report that will help you prepare your state payroll tax returns manually 276

State Payroll Detail Report • The Employee State Taxes Detail report allows you to see all of the State tax items summarized by employee • Select the Reports menu, then select Employees & Payroll, and then select Employee State Taxes Detail • The Income Subject to Tax column is very important for many state payroll tax reports 277

Summarizing Payroll Information in Microsoft Excel • The Summarize Payroll Data in Excel function allows you to export all payroll information to an Excel spreadsheet where you can manipulate it to suit your company’s unique needs • Select the Reports menu, then select Employees & Payroll, and then select Summarize Payroll Data in Excel • Set the Fromand the Todate, then click Get QuickBooks Data 277

Chapter Review • Update your Payroll Tax Tables • Create Paychecks and override default calculations • Edit, Void, and Delete Paychecks • Pay Payroll Liabilities • Adjust Payroll Liabilities • Create Payroll Reports • Prepare Payroll Tax Forms 941, 940, W-2s, and reports to help you prepare your State payroll tax returns 280

Payroll Processing