How to Set Up Payroll in QuickBooks Desktop

Whatever the case may be, QuickBooks' feature-packed software helps businesses balance the books, track their expenses, and pay their employees.

Obviously, QuickBooks' payroll is one of its most impressive features. In addition to providing your business with a quick and easy way to pay your employees on time, this software also provides you with additional useful functions such as calculating payroll taxes and filling out tax forms to help your company stay on top of your payroll taxes.

Regrettably, the cost of your QuickBooks Desktop license or monthly subscription does not cover payroll services. To access this feature, users must pay an extra fee to add on QuickBooks Payroll. The price varies depending on the plan you select, ranging from 29 to 109 dollars per month. In addition, there is a fee of 2 dollars per employee, based on your chosen plan and payment schedule (per paycheck or per month). Nonetheless, you can take advantage of a complimentary 30-day trial before committing to a longer subscription.

You can easily access QuickBooks Payroll through your QuickBooks Desktop dashboard without downloading anything, so you can start processing payroll right away.

Here we'll explain how to set up QuickBooks payroll step by step and help you gather the proper paperwork to do business payroll successfully.

First, let's take a look at what QuickBooks needs to run.

What Do Businesses Need to Include in QuickBooks?

To make setting up QuickBooks payroll as easy and quick as possible, you must gather all the necessary information and documents before you begin using the software. In this article, we will walk you through every step of the process to make sure you know how to set up QuickBooks payroll efficiently.

Each employee must complete and sign a W-4 form.
Information about each employee, including their legal name, birthday, address, hire date, and termination date.
In the section: "How much do you pay your employees?" enter their wages and input the default number of hours they work per day or week.
Select the "create pay schedule" button under the "How often do you pay employees" section to specify a pay schedule for your staff.
The types and numbers of deductions your employees may have on their paychecks should be known. Wage garnishments, health insurance premiums, and retirement accounts are some of the common deductions.

How To Set Up QuickBooks Payroll?

1. Gather Employee Information

Collect the following information for each employee:

Full name, address, and Social Security number
Tax withholding details (W-4 form)
Pay rate and frequency
Bank account information for direct deposit

2. Obtain Employer Identification Number (EIN)

Ensure you have an Employer Identification Number (EIN) from the IRS, which is required for tax filings and reporting.

3. Set Up Payroll Bank Account

Set up a dedicated bank account for payroll transactions to manage and track payroll expenses separately.

Setting Up QuickBooks Payroll

1. Access Payroll Setup

Go to the Employees menu and select Payroll Setup.

2. Enter Company Information

Provide your company details, including:

Company name and address
EIN and state tax ID numbers

3. Configure Payroll Preferences

Set up payroll preferences such as:

Pay schedule (weekly, bi-weekly, monthly, etc.)
Payment method (direct deposit, check)
Payroll reminders and notifications

Adding Employees

1. Enter Employee Details

For each employee, enter the following details:

Personal information: Name, address, Social Security number
Employment details: Hire date, job title, department
Pay details: Pay rate, overtime rate, bonuses, and commissions

2. Set Up Tax Withholding

Configure federal and state tax withholding based on the employee's W-4 form:

Federal withholding: Enter the details from the employee’s W-4 form.
State withholding: Enter the state-specific tax withholding details.

3. Add Direct Deposit Information

If using direct deposit, enter the employee’s bank account information:

Bank name, routing number, and account number

Setting Up Payroll Items

1. Define Earnings Items

Set up various types of earnings items such as:

Regular pay
Overtime pay
Bonuses and commissions
Reimbursements

2. Configure Deduction Items

Set up deduction items like:

Health insurance premiums
Retirement plan contributions (401(k), IRA)
Wage garnishments

3. Set Up Company Contributions

Define company contribution items, including:

Employer-paid health insurance
Retirement plan matching contributions
Other benefits

Running Your First Payroll

1. Review Payroll Details

Before processing payroll, review all details for accuracy:

Employee pay rates and hours worked
Overtime, bonuses, and deductions
Tax withholdings and contributions

2. Process Payroll

To run payroll:

Go to the Employees menu and select Run Payroll.
Follow the on-screen prompts to enter payroll details and review the payroll summary.
Confirm and submit payroll for processing.

3. Distribute Paychecks or Direct Deposits

Ensure that employees receive their pay on time:

Print and distribute checks if using paper checks.
Verify that direct deposit payments are processed correctly.

Ensuring Compliance and Accuracy

1. Regularly Update Employee Information

Keep employee records up-to-date to ensure accurate payroll processing and tax reporting.

2. Stay Informed on Tax Laws

Stay updated on federal, state, and local tax laws to ensure compliance. QuickBooks Payroll updates tax rates automatically, but it's important to verify changes that may affect your business.

3. Conduct Periodic Payroll Audits

Regularly audit your payroll system to identify and correct any discrepancies or errors. This includes reviewing payroll reports and reconciling payroll bank accounts.

Troubleshooting Common Issues

1. Direct Deposit Errors

If direct deposits fail:

Verify the employee’s bank account information.
Ensure sufficient funds are available in the payroll bank account.
Contact QuickBooks support for further assistance.

2. Tax Calculation Issues

If tax calculations seem incorrect:

Review employee tax withholding details.
Ensure tax rates are up-to-date.
Consult QuickBooks support or a tax professional if issues persist.

3. Payroll Processing Delays

If payroll processing is delayed:

Check for software updates and install them.
Verify internet connectivity and system performance.
Contact QuickBooks support for help resolving delays.

Conclusion

set up payroll in QuickBooks successfully involves careful planning, accurate data entry, and a clear understanding of payroll processes. By following this comprehensive guide, you can ensure that your payroll system is set up correctly, helping you manage employee payments efficiently and stay compliant with tax regulations. With QuickBooks Payroll, you can simplify your payroll tasks and focus on growing your business.