Everything you need to know to get started using QuickBooks Payroll

Get Started with QuickBooks Payroll Lesson #1: Navigation and Setup Navigate Easily through QuickBooks Payroll QuickBooks provides a single screen from which you can manage employee data and handle all payroll activities, including paying employees, paying liabilities, and processing payroll tax forms. In QuickBooks 2006: Use the Employee Center and the Payroll Center. From the menu at the top of the screen, select Employee Center. To access the Payroll Center, go to the Employee Center and click the Payroll tab. In QuickBooks 2005 and 2004: Use the Employee Navigator. From the list of Navigators on the left side of the screen, click Employees. Start your payroll-related tasks in the Payroll Center in QuickBooks 2006.

Understand the Fundamentals of QuickBooks Payroll

We know you're eager to get started using QuickBooks to run your payroll. Before you begin, take a moment to understand these fundamentals. They are crucial to understanding how QuickBooks Payroll works.

Payroll Service Key
Your Payroll Service Key and (for subscribers to the Disk Delivery service) your Disk Delivery Key are the keys that activate your QuickBooks Payroll subscription in QuickBooks and give you access to payroll functionality and payroll updates. In most cases, the key should already be in your company file. If you are having trouble using the payroll features in QuickBooks, the absence of a service key is one of the chief culprits. For more information, see the tip Make Sure Your Payroll Service Key Is Already in Your Company File.

If you haven't done so already, take a moment to write down your key(s) and store them somewhere safe, in case you need to refer to them later.

Payroll Updates
Our payroll tax updates are probably the primary reason you decided to subscribe to our service. QuickBooks Payroll's tax compliance experts continually monitor state and federal tax changes, so you don't have to. QuickBooks Payroll uses payroll updates to deliver the latest tax tables and tax forms to your QuickBooks software, so you have the most up-to-date information when you run your payroll, pay your taxes, and prepare your tax forms.

QuickBooks Payroll releases payroll updates throughout the year. Most updates come out at the end and the beginning of the calendar year, when federal and state governments usually update their tax rates and tax forms. However, it's important to understand that federal and state agencies can and do make changes to their tax structures in the middle of the calendar year. And when changes happen, QuickBooks Payroll creates new payroll updates to deliver those changes to subscribers in simple downloads. For example, Mississippi decided in March 2005 to establish a new workforce training tax. QuickBooks Payroll subsequently created a payroll update for that new tax, so that subscribers in Mississippi would have the updated information in their systems when they ran subsequent payrolls.

Because payroll updates can be and are released at any time of the year, it's a good idea to keep Automatic Updates turned on for payroll, to ensure that your tax tables and tax forms are always current. Automatic Updates are turned on by default. If you or someone else turned them off, it's a good idea to turn them back on now. Learn how.

Payroll Items
Everything that you track on a paycheck needs a corresponding payroll item. These include hourly wages; salaries; sick time; vacation time; federal, state, and local taxes; employee and company 401(k) contributions; garnishments such as child support; and so forth. Payroll items are also needed for non-taxable items such as mileage reimbursements and employee loans.

Setting up payroll items. There are seven types of payroll items: Wage, Addition, Deduction, Company Contribution, Federal Tax, State Tax, and Local Tax. Normally you set up payroll items when you go through the Payroll Setup Interview. If you later add a new employee benefit, for example, you can add payroll items from the Employees menu. We'll talk more about that in Starting Points Lesson #5: Get the Most Out of QuickBooks Payroll.

Specifying tax tracking types. Addition, Deduction, and Company Contribution payroll items all have tax tracking types. These types determine what impact the payroll item has on taxes. They also determine how the amounts of those payroll items get reported on payroll tax forms, such as the employee's Form W-2. It's very important to specify the correct tax tracking type from the beginning. If you're not sure what tax tracking type a particular payroll item should have, consult your accountant or tax advisor.

• View tax tracking type: To find out what tax tracking type your payroll items have, run a Payroll Item Listing report. From the Reports menu, select Employees & Payroll, then Payroll Item Listing. The Tax Tracking column lists each payroll item's tax tracking type.
• Discover the tax implications: To find out the tax implications of a particular tax tracking type, open a payroll item that is an Addition, Deduction, or Company Contribution. Click Next until you reach the Tax Tracking Type screen. When you select an option from the drop-down list, QuickBooks displays a summary of the payroll item's impact on taxes and tax forms.

Employee Records
Each employee should have their own employee record in QuickBooks. This is where you specify employees' compensation rates, as well as any Additions, Deductions, or Company Contributions they receive.

Setting up employees. Normally you set up employee records when you go through the Payroll Setup Interview. You can also add employees later. We'll talk more about that in Starting Points Lesson #5: Get the Most Out of QuickBooks Payroll.

Reviewing employee information. To review the information for a particular employee:

1. In QuickBooks 2006: From the Employees menu, select Employee Center. Click the Employees tab if it is not already selected.
   In QuickBooks 2005 and 2004: From the Employees menu, select Employee List.
2. Double-click on an employee.
3. Use the Change tabs drop-down menu to see the different parts of the employee's record.

Year-to-Date Amounts
If you start using QuickBooks Payroll after the beginning of the calendar year, it's very important to take the time to enter your payroll year-to-date amounts in QuickBooks. Year-to-date amounts are the amounts that have already accrued in the calendar year for each payroll item. For example, these amounts include the wages you've paid to each employee, 401(k) contributions for or by each employee, and the various taxes you've already accrued for the year. Entering year-to-date amounts ensures QuickBooks has the complete information it needs come tax time. This process is moderately time-consuming, but if you fail to enter year-to-date amounts completely and correctly you almost certainly will have accounting headaches later.

The Payroll Setup Interview will guide you through the process of entering your year-to-date amounts. If you are not sure how to handle certain amounts, consult your accountant or tax advisor.

For more information, look in QuickBooks Help. Click the Index or Help Index tab and type year-to-date amounts.