Everything you need to know to get started using QuickBooks Payroll

Prepare Your Payroll Liabilities Lesson #3: Managing Payroll Taxes Now that you've set up payroll in QuickBooks and learned how to run a payroll, we'll show you how to pay your payroll taxes and other liabilities. With every payroll run, you accrue liabilities that you eventually need to pay, such as income tax withholdings, 401(k) contributions, and child care garnishments. QuickBooks tracks these amounts automatically, so you can easily pay them when they're due. Understand How Payroll Liabilities Work in QuickBooks Here are the general concepts behind how QuickBooks manages payroll liabilities. Understanding these will help you understand how QuickBooks Payroll works. What's a Payroll Liability? Like other liabilities, payroll liabilities are amounts you owe but have not paid yet. In the case of payroll liabilities, these include payroll tax amounts that you've withheld from employees or that your company owes as a result of your payrolls. Payroll liabilities also include other amounts you track on paychecks using payroll items, such as 401(k) contributions, health insurance contributions, union dues, and garnishments for child support. Payroll Liabilities Account QuickBooks tracks your outstanding payroll liabilities in the Payroll Liabilities account, based on the payroll items created on each paycheck. When you do your payroll, QuickBooks calculates how much is owed for each tax, deduction, and company contribution payroll item and records it in the Payroll Liabilities account. QuickBooks automatically creates the Payroll Liabilities account when you subscribe to QuickBooks Payroll. With each paycheck you write, the balance of this liability account increases. When you pay your payroll taxes or other payroll liabilities, QuickBooks decreases the balance of this liability account. Payroll Liability Checks Always pay your payroll liabilities using payroll liability checks, which you create in the Pay Payroll Liabilities window. (In QuickBooks 2006, you can also create payroll liability checks starting from the Payroll Center.) Payroll liability checks allow QuickBooks to accurately track how much tax and other liabilities you've paid, as well as how much you still owe. Use payroll liability checks to pay your taxes and other payroll liabilities. Important: Do not use the Write Checks window; otherwise, QuickBooks will think you haven't paid your taxes, and the amounts on your tax forms will be wrong. Payroll Liability Balances Report Use this report to see the outstanding payroll liabilities your company owes. You can change the time period covered by changing the dates in the From and To fields. If your company paid a liability incurred within the date range of the report, the report omits that liability, even if the payment occurred after the ending date of the report. This report totals by payroll item, not by agency. You can also modify this report to show the liabilities you've paid instead of what you owe. Click Modify Report, and then click the Filters tab. Select Transaction Type from the Filter scroll box. Click the Transaction Type drop-down menu and select Payroll Liability Check. To see a list of the transactions that make up an amount, double-click the amount. To access this report: From the Reports menu, select Employees & Payroll and then Payroll Liability

Pay Your Payroll Taxes and Other Payroll Liabilities

QuickBooks Payroll makes paying your payroll taxes and other payroll liabilities a snap. The service enables QuickBooks to track your taxes and liabilities on an ongoing basis, so all you need to do is create the payroll liability check from within QuickBooks, sign it, and mail it to the government agency.

Note: If at some point your business becomes so busy or large that you want someone else to take care of your tax hassles for you, check out our Assisted Payroll service. Assisted Payroll offers all the benefits of outsourcing at a fraction of the cost—we take care of the tax filings and deposits and W-2s for you.

Important: Before you get started, double-check that you have a payee name for the payroll item associated with each payroll liability. QuickBooks sets up many payroll items for you automatically, but it doesn't necessarily set up a payee name for those items. Save yourself some time up front and double-check that each liability has a payee name.

To pay your payroll taxes and other payroll liabilities in QuickBooks, follow the instructions for your version of QuickBooks. New features in QuickBooks 2006 automate some of the steps for you.

QuickBooks 2006

1. From the Employees menu, select Payroll Center.
2. If you haven't already done so, set the deposit frequencies for your liabilities. In the Pay Taxes and Other Liabilities section, click the Set Deposit Frequencies button and set the frequencies for your payroll taxes and other liabilities. Setting the deposit frequencies lets QuickBooks track your upcoming due dates, so you don't have to. Just check the Pay Taxes and Other Liabilities table to find out which liabilities are coming due.
3. When you're ready to pay your payroll taxes and other payroll liabilities, go to the Pay Taxes and Other Liabilities section of the Payroll Center and select the name of the vendor you want to pay.
4. Click Pay Now, and the check for that vendor will be created automatically.
5. In the Liability Check window that appears, choose the bank account from which to pay your liability.
6. In the check Date field, enter the date to appear on the payroll liability check.
7. Indicate whether you plan to print your payroll liability checks from QuickBooks.
   • If you plan to print your payroll liability checks from QuickBooks, select the To be printed checkbox.
   • If you plan to write your payroll liability checks by hand, clear the To be printed checkbox, then enter the number of the first check in the check run in the No. field.
   • If you plan to make your payment by phone or online, clear the To be printed checkbox. You can enter a memo, such as "PHONE" or "ONLINE," in the No. field.
8. Click Save and Close. QuickBooks creates your payroll liability check.

QuickBooks 2005 and 2004

1. From the Employees menu, select Process Payroll Liabilities, and then Pay Payroll Liabilities.
2. Choose the date range for which you want to pay payroll taxes or other payroll liabilities.
3. Click the Pay by Check tab, if it is not already displayed.
4. Indicate whether you plan to print your payroll liability checks from QuickBooks.
   • If you plan to print your payroll liability checks from QuickBooks, select the To be printed checkbox.
   • If you plan to write your payroll liability checks by hand, clear the To be printed checkbox, then enter the number of the first check in the check run.
   • If you plan to make your payment by phone or online, clear the To be printed checkbox. You can enter a memo, such as "PHONE" or "ONLINE," in the No. field.
5. Choose the bank account from which to pay your liabilities.
6. In the Check Date field, enter the date to appear on your payroll liability checks.
7. Choose one of the following:
   • Review liability check to enter expenses/penalties: Choose this if you want to review each payroll liability check individually before creating it.
     Tip: When you first start using QuickBooks Payroll, it's a good idea to go ahead and review the payroll liability checks. That way you can start learning how QuickBooks Payroll works. For example, you'll notice Expenses and Payroll Liabilities tabs at the bottom. You'll see how QuickBooks lists each payroll item in the Payroll Liabilities tab, especially when you are making payments for multiple payroll items to the same payee, such as your bank.
   • Create liability check without reviewing: Choose this if you simply want QuickBooks to create the payroll liability checks immediately.
8. Select the liabilities you want to pay now. Place a check mark next to each liability you want to pay by clicking in the field next to the appropriate liability. To deselect a liability, click in the field to remove the check mark.
   Note: If you select one of two related liabilities, QuickBooks automatically selects the other one. For example, if you select company-paid Social Security, QuickBooks also selects employee-paid Social Security. You can select as many liabilities as you want. QuickBooks will create a separate payroll liability check for each payee when you click Create.
   Tip: To have QuickBooks display only liabilities where you have balances to pay, select the Hide zero balances checkbox.
9. Click Create. QuickBooks creates your payroll liability checks.
10. If you selected Review, review your payroll liability checks.

 

Double-Check Payee Names

Before you can create payments, you must have a payee name associated with each liability. You can associate each payroll item with a single vendor whose name appears on payroll liability checks for that liability. These names are stored in the Vendor list and are usually tax agencies or financial institutions, but they may also be insurance companies or other vendors.

1. From the Employees menu, select Payroll Item List.
2. Select the payroll item for which you need to enter a payee name.
3. From the Payroll Item menu button at the bottom of the screen, select Edit Payroll Item.
4. In the Edit Payroll Item window, verify the payroll item name and click Next.
5. In the Enter name of agency to which the item is paid field, enter or choose the appropriate payee name.
6. Click Next until you can click Finish.

For more information, look in QuickBooks Help, which contains many explanations and instructions regarding payroll liabilities. To get started, see these topics:

• Paying payroll liabilities
• Verifying payroll liabilities
• Why do my payroll liabilities show the wrong amount due?
• Entering prior liability payments during payroll setup

Print Your Payroll Liability Checks

To print your payroll liability checks:

1. Load your checks into your printer.
2. From the File menu, select Print Forms, and then select Checks.
3. From the Bank Account drop-down list, choose the checking account that contains the payroll liability checks you want to print.
4. Be sure the number in the First Check Number field matches the number of the first check in your printer.
5. Select the payroll liability checks you want to print.
   Tip: If the payroll liability check you want to print is not on the list in the Select Checks to Print window, go back to your register, find the check, select the check and click Edit Transaction, type T in the Num field (in QuickBooks 2005 and 2004, this field is called No.), and click Save & Close.
6. Click OK.
7. Choose the printing options you need. Press F1 for Help with a particular option.
8. (Page-oriented printers only) If you want to print duplicate copies of voucher checks, type 2 in the Number of copies field.
9. Click Print. If you notice a problem while your payroll liability checks are being printed, press Esc to cancel the printing process.
10. Fill in the Did check(s) print OK? window.
    This window gives you an opportunity to confirm that your payroll liability checks printed correctly. If there were any problems, for example, if the paper tore or the ink ran out, enter the number of the first payroll liability check that didn't print correctly and proceed to reprint the remaining payroll liability checks.

 

Tips

Know Your Tax Schedule

As an employer, you withhold federal, state, and (sometimes) local taxes from your employees' pay. You also must pay matching amounts of Social Security and Medicare taxes. How often you pay and report payroll taxes depends on the size of your payroll.

If you have QuickBooks 2006, you can customize the Payroll Center to keep track of the due dates for your taxes—as well as any of your other payroll liabilities, such as payments to your 401(k) vendor or your health insurance carrier. The due dates appear in the Pay Taxes and Other Liabilities table on the Payroll Center. To set your due dates, click the Set Deposit Frequencies button.

If you're not sure what your tax schedule is, consult your accountant or your tax advisor.

For more information about employment taxes, visit the following Web sites:

• Small Business Administration: Federal Income Tax
• Small Business Administration: Payroll Taxes
• Internal Revenue Service: Businesses with Employees

 

Update Your SUI and SDI Rates in QuickBooks When Your State Sends You New Rates

QuickBooks Payroll subscribers in most states must update their state unemployment insurance (SUI) rates in QuickBooks themselves. The QuickBooks Payroll tax table does not include updates to these rates because states assign each employer a unique rate. Employers located in states that have state disability insurance (SDI) will also need to update their SDI rates themselves.

To update your SUI or SDI rates in QuickBooks:

1. From the Employees menu, select Payroll Item List.
2. Double-click the SUI or SDI item you want to change.
3. Click Next until you reach the window that displays your current-year rates.
4. Edit your rate or rates (enter this in percentage form, like 4% and not .04).
5. Click Next until you reach the window that displays a Finish button and click Finish.

Note: Most states update their rates only at the beginning of each year, but if you're in a state that changes rates at different times of the year (such as New Jersey), remember to update the rate when you get your state notice.

Quick Tip: For more information about state unemployment insurance rates and the defaults QuickBooks Payroll prepopulates, see the QuickBooks Payroll State Unemployment page on web.intuit.com/stateuitax1.

Quick Tip: For more information about state disability insurance rates and the defaults QuickBooks Payroll prepopulates, see the QuickBooks Payroll State Disability page on web.intuit.com/quickbooks/products/tax/sditext.html.

 

View the QuickBooks Payroll Tax Table

At some point, you might decide you want to take a look at the tax table QuickBooks Payroll uses to calculate your taxes. To do this, you can run a Payroll Item Listing report that shows you the tax rates and wage bases for each of your taxes.

1. From the Employees menu, select Payroll Item List.
2. Click the Reports menu button, and select Payroll Item Listing.

Checking a Rate
The Amount column of the Payroll Item Listing report shows the tax rate of all flat-rate taxes (such as federal unemployment or Social Security). Depending on the tax, the rate either comes from the QuickBooks Payroll tax table (which is delivered to you via payroll updates) or is one you entered manually when you set up the payroll item (such as a local tax not tracked by QuickBooks Payroll or your state unemployment rate, which is unique to each employer and therefore not included in the QuickBooks Payroll tax table).

Checking a Wage Base
The Annual Limit column of the Payroll Item Listing report shows the tax's current wage base limit, or maximum annual wage subject to this tax. For Social Security, federal and state unemployment taxes, and most other taxes supported by the payroll update, the wage base limit comes from the QuickBooks Payroll tax

 

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