How to Record Payroll in QuickBooks Desktop and Online?

Recording payroll is essential for companies to effectively manage their personnel, guarantee accurate and timely employee compensation, and adhere to legal and tax requirements.

Payroll is the process of paying employees for their work within a set period of time, usually once a week, twice a week or once a month.

Payroll processes are automated and streamlined by many companies using QuickBooks payroll software, which lowers errors and saves time.

How to record payroll in QuickBooks Desktop?

To ensure accurate and effective payroll processing, there are numerous essential stages involved in recording payroll in QuickBooks Desktop.

The first important step is to set up payroll items, where you can specify different pay types, contributions, and deductions that are unique to your business. The next step is to input each employee’s personal data, including name, address, tax exemptions, and payment information.

After this data is in place, the system uses the entered data to calculate payroll, accounting for pertinent components such as hours worked and overtime. Payroll creation for employees then happens automatically, and you may check and change the amounts as needed.

Record payroll in QuickBooks Desktop

To record payroll in QuickBooks Desktop, set up payroll with company and employee details, process payroll, record liabilities and expenses, and generate necessary payroll reports.

Following the step-by-step information below:

Step 1: Set Up Payroll in QuickBooks Desktop

1. Open the QuickBooks Desktop application on your computer.
2. Go to the “Employees” menu at the top of the screen.
3. Choose Payroll Setup.
4. Click on “Payroll Setup” from the drop-down menu.
5. Put Company Information [ You need to provide necessary information about your company, such as business name, address, and federal Employer Identification Number (EIN) ]
6. Set Up Payroll Items [ Mention payroll items such as salary, hourly wages, bonuses, and deductions ].
7. Enter the details of each employee, including personal information, pay rates, tax withholding preferences, and direct deposit information, if applicable.

Step 2: Process Payroll

1. Click on the Payroll Center and then go to the “Employees” menu and choose “Payroll Center.”
2. Click on the “Pay Employees” tab, then choose “Start Scheduled Payroll” to begin processing payroll for the current pay period.
3. Select the employees for whom you are processing payroll. Ensure all relevant employees are checked.
4. Put the Hours Worked by the employees.
5. Review and Adjust Paychecks:
6. Click “Create Paychecks” to finalize the payroll.

Step 3: Record Payroll Liabilities and Expenses

1. Go to the Payroll Center and then choose “Payroll Center” again from the “Employees” menu.
2. Click on the “Pay Liabilities” tab to record payroll tax payments and other liabilities.
3. Select the liabilities you need to pay, verify the amounts, and click “View/Pay” to record the payments.
4. Put Expense Accounts.

Step 4: Generate Payroll Reports

1. Click on the “Reports” menu at the top of the screen.
2. Select “Employees & Payroll” and then choose the specific payroll reports you need, such as Payroll Summary, Payroll Detail, or Tax Liability reports.
3. Customize the date range and other parameters as needed, then run the reports to review payroll information. 

How to record payroll in QuickBooks Online?

Creating payroll becomes a smoother process with QuickBooks Online. The platform not only allows you to review and modify employee compensation before finalizing the payroll but also ensures accuracy and compliance with tax filing requirements, giving you peace of mind.

Payroll options, such as payment dates, deductions, and perks, are simple for users to set up. Adding employees is easy, with choices to enter personal information, salary scales, and tax information. The best part is its user-friendly interfaces, which make payroll data entry, including hours worked and overtime.

Record payroll paychecks you create outside of QuickBooks Online

A lot of times, we use other services to run a payroll, but still require to keep track of those paychecks in QuickBooks. We consider those paychecks as “paychecks made outside of QuickBooks”. So, in order to track them manually, follow the below steps:

Steps to create journal entries for paychecks you create outside of QuickBooks

To manually record paychecks in QuickBooks, first create payroll expense and liability accounts. Then, enter journal entries for gross wages, payroll taxes, and net wages using the employees’ payroll details.

Following the step-by-step information below:

Step 1: Create manual tracking accounts

You must have an account in your Charts of Accounts. If you don’t have one, first create a new account by following the steps to add a new account. In your Charts of Accounts, follow the steps to add a new account.

1. Then, create the expense accounts and choose the Expense as the account type. 

1. Payroll Expenses: Wages
2. Payroll Expenses: Taxes

2. Now, create the liabilities accounts and select liability as the account type:

1. Payroll Liabilities: Federal Taxes (941/944)
2. Payroll Liabilities: Federal Unemployment (940)
3. Payroll Liabilities: [State] SUI/ETT
4. Payroll Liabilities: [State] PIT/SDI

Note: These accounts cover common payroll tax situations. Additional accounts may be needed for state or local taxes.

Step 2: Enter the payroll paychecks

Make sure to retrieve your employees’ payroll pay stubs or a payroll report from your payroll service. You will use this information to create the journal entry. 

If you have paid multiple employees for the pay period, you can combine all the paychecks into one journal entry, or you can use individual journal entries if you want to keep the details separate.

Now, you need to create a journal entry by following the steps below:

1. Choose + New.
2. Click on Journal Entry.
3. Mention the paycheck date under the Journal date.
4. In case you want to track the paycheck number, enter it in the Journal no. field.

Add gross wages

1. Choose the Payroll Expenses: Wages for the account.
2. Put the amount as a debit.

Add employer payroll taxes

1. Choose the Payroll Expenses: Taxes for the account.
2. Put the amount as a debit.

Note: You can combine taxes into one debit or add each tax item as an individual debit. Taxes such as:

• Social Security Employer
• FUTA Employer
• State Job training taxes
• Medicare Employer
• State unemployment insurance

Add taxes paid towards 941 or 944 taxes

1. Choose Payroll Liabilities: Federal Taxes (941 or 944) for the account.
2. Put the amount as a credit.

Note: You can combine taxes into one debit or add each tax item as an individual debit. Taxes such as:

• Federal Income taxes
• Social Security Employee
• Social Security for Employer
• Medicare for Employee
• Medicare for Employer

Add state unemployment insurance taxes.

1. Choose the Payroll Liabilities: [State] SUI/ETT Liability for the account.
2. Put the amount as a credit.

Note: You can combine taxes into one debit or add each tax item as an individual debit. Taxes such as:

• State Unemployment Insurance
• State Employment Training Tax

Add state income taxes

1. Choose Payroll Liabilities: [State] PIT/SDI for the account.
2. Put the amount as a credit.

Note: You can combine taxes into one debit or add each tax item as an individual debit. Taxes such as:

• State Personal Income Tax
• State Disability Insurance.

Add federal unemployment taxes (FUTA)

1. Choose Payroll Liabilities: Federal Unemployment (940) for the account.
2. Put the amount as a credit.

Add net wages

1. Pick the checking account from which you’re paying your employees.
2. Instead of combining them, put each paycheck on separate lines. Put the amounts as credits.

3. When you’re done entering the debits and credits, click on the Save option.

Record paid payroll in QuickBooks Online

1. Click on Payroll.
2. Choose Employees.
3. Click on Run Payroll.
4. Choose a Pay schedule and Pay date.
5. Select the Employee whose payment you want to record
6. Click on the Actions button on the screen, then select Edit paycheck to enter the pay details. [ You can add hours, compensation, memos, or any other necessary paycheck information in this section. ]
7. Click on Preview Payroll.
8. Click on Submit Payroll.

In case you don’t use the QuickBooks Online Payroll; you can then create journal entries for paychecks that you create outside of QuickBooks.

Record a payroll tax from a prior tax period in QuickBooks Online

There are scenarios where some of the taxes go missing. So, now are the steps mentioned below, which include the payment for a tax that no longer appears in the list of due taxes.

Steps to record a tax payment for a prior tax period from QuickBooks Online

1. Click on Taxes and choose Payroll Tax.
2. Click on Prior tax history.
3. Click on Add Payment.
4. Put the required payment information.
5. Click on OK.

Record a payroll tax that is currently due in QuickBooks Online

If you have already made a tax payment but the payment still appears due, there is a high possibility that the payment was made outside of QuickBooks Payroll.

Steps to remove the tax payment reminder from QuickBooks Online

To record a tax payment:

1. Click on Taxes and choose Payroll Tax.
2. Click on the Payments tab.
3. In the Upcoming tax payments section, select Pay for the tax you want to pay.
4. Choose Other and put the actual date the payment was made; for the Payment Date,
5. Mention the cheque number.
6. Click on Record and Print.

To verify that your tax payment was recorded:

1. Click on Reports.
2. Choose the Payroll Tax Payments report under the Payroll section,
3. Confirm that the tax payment was recorded.

Now that you’ve followed these steps, you can be confident that your payroll tax payments have been recorded correctly.

How to create a new account in the Chart of Accounts?

Before you record the payroll in QuickBooks, it’s crucial to create a new account in the Chart of Accounts. This account is not just a step but a significant responsibility for tracking payroll liabilities and expenses.

Steps to add a new account

1. Go to Settings and then click on Chart of Accounts.
2.  Click on New.
3. Now, enter the account name.
4. Click on Account type and select the Detail type from the dropdown menu.
5. If the account is a sub-account, then click on “Make this a sub account” and then choose the Parent account it should be under.
6. Enter the opening balance and mention the starting date in the As of the field if you have selected the Bank, Credit card, liabilities, asset, or equity account.
7. Enter the description to add additional information about this account. (This is an optional step).
8. Click on Save.

Tips and Best Practices for Recording Payroll in QuickBooks

By keeping correct payroll records, businesses can successfully track employee salaries and ensure compliance with tax requirements.

Maintaining up-to-date payroll tax rates, reviewing and adjusting payroll settings, and routinely reconciling payroll accounts are crucial tasks in QuickBooks. Payroll reports offer insightful information on labor expenditures, overtime, and payroll liabilities, making informed decisions possible.

Following best practices while handling employee paychecks, deductions, and payroll-related activities is necessary for effectively documenting payroll in QuickBooks.

• Maintain Employee Records
• Regularly reconcile payroll accounts.
• Utilize Payroll Reports for Better Insights

Conclusion

Recording payroll in QuickBooks is an essential procedure that guarantees your company complies with tax regulations and keeps correct financial records. By adhering to systematic procedures, which include setting up payroll items, updating employee details, executing payroll, and recording payroll expenses, you can expedite your payroll process, lower errors, and save time. The control and insight QuickBooks provide not only make accounting responsibilities easier but also give you a comprehensive picture of the financial health of your business.