Episode 04: A Comprehensive Guide to Running Payroll and Processing Payroll Taxes

Introduction

QuickBooks Online is a powerful tool for small to medium-sized businesses, offering comprehensive features for managing payroll and processing payroll taxes. This newsletter episode will guide you through the process of setting up payroll in QuickBooks Online, creating paychecks, and running payroll reports. Additionally, it will provide insights into managing tax obligations, employee information, and leveraging the different payroll plans available in QuickBooks Online.

Setting Up Payroll in QuickBooks Online

Activating Payroll Services

To start managing payroll in QuickBooks Online, you need to activate payroll services. This can be done by navigating to the "Subscriptions and Billing" section within the "Gear" menu. Here, you can select one of three payroll plans: Core, Premium, or Elite.

• Core: This plan costs $45 per month plus $6 per employee per month. It covers basic payroll functions.
• Premium: At $80 per month plus $8 per employee, this plan includes expert review, QuickBooks Time for tracking employee hours, and same-day direct deposit.
• Elite: Priced at $125 per month plus $10 per employee, this plan offers job costing, penalty protection, and expert setup services.

Once you've chosen a payroll plan, you can activate it through QuickBooks Online.

Adding and Managing Employees

Manual Employee Setup

When setting up employees, you can either manually enter their details or use the employee self-setup option. Manual setup requires entering personal details such as name, address, and Social Security number, as well as tax withholding information based on their W-4 forms.

• Pay Schedules: You can set up various pay schedules—weekly, bi-weekly, or monthly—depending on your company’s payroll cycle.
• Deductions: You can also configure deductions such as health insurance, pre-tax or post-tax, and employer contributions.

Employee Self-Setup

The employee self-setup feature allows employees to enter their own personal information, reducing the administrative burden on the employer. After the employer initiates the process, employees receive an email prompting them to enter their details, including direct deposit information and tax withholdings.

Direct Deposit and Paper Checks

Employees can choose between direct deposit and paper checks. Direct deposit requires additional verification steps, while paper checks can be printed directly from QuickBooks. Employers can override an employee's choice if necessary.

Running Payroll

Creating Paychecks

Running payroll in QuickBooks Online is a straightforward process. After entering the hours worked or salary details for each employee, QuickBooks calculates the gross and net pay. You can manually adjust these figures if needed before finalizing the payroll.

• Overtime and Additional Pay: QuickBooks allows for the addition of overtime hours, bonuses, and other pay types.
• Previewing Paychecks: Before submitting payroll, it’s essential to preview the paychecks to ensure accuracy.

Payroll Submission and Reporting

Once the payroll details are confirmed, you submit the payroll to QuickBooks. This triggers the necessary tax calculations and filings, depending on whether you’ve opted for manual or automated tax filing.

• Reports: After payroll is submitted, you can generate and export payroll reports, including payroll summaries and liability reports, in formats like Excel or PDF.

Managing Payroll Taxes

Setting Up Tax Withholdings

Proper setup of tax withholdings is crucial to avoid issues with the IRS or state tax agencies. QuickBooks Online allows you to enter the necessary tax information during the payroll setup process.

• Federal and State Taxes: Enter your company’s Employer Identification Number (EIN) and state tax rates to ensure accurate tax calculations.

Automated vs. Manual Tax Payments

QuickBooks Online offers an automated tax payment and filing service, which handles all tax obligations on your behalf. However, if you prefer, you can opt to manage tax payments manually.

• Manual Tax Payments: For those who choose manual payments, QuickBooks allows you to record payments made directly to tax agencies and generate reports for record-keeping.

Tax Filing

Tax filing within QuickBooks Online is streamlined, with forms like the W-2 and 941 automatically generated based on the payroll data entered. These forms can be reviewed and submitted electronically to the appropriate tax agencies.

Payroll Reporting and Additional Features

Payroll Reports

QuickBooks Online offers various payroll reports, including payroll summaries and liability reports, which provide a detailed overview of payroll expenses, taxes, and liabilities.

• Customizing Reports: You can customize these reports by date range, employee, or location to get the exact information you need.

Employee Access via Workforce

QuickBooks Online’s Workforce feature allows employees to view their paychecks, update their personal information, and access tax forms like the W-2 directly. This feature enhances transparency and reduces administrative tasks for employers.

Conclusion

Managing payroll in QuickBooks Online is a streamlined process, thanks to its intuitive interface and robust features. By following the steps outlined in this newsletter, businesses can efficiently set up and run payroll, ensuring compliance with tax laws and improving overall operational efficiency. Whether you're using the Core, Premium, or Elite plan, QuickBooks Online provides the tools necessary to manage payroll with confidence.

This newsletter covers the basics of setting up and managing payroll in QuickBooks Online. For more detailed information on specific features or advanced payroll management techniques, contact QuickBooks support team.

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