Chapter
3
Chapter 3
Chapter 1: Company File Setup and Maintenance
Page ref.
Payroll Setup
103
Chapter
3
1.
2.
3.
4.
5.
6.
Objectives
Activate the payroll feature and configure payroll
preferences
Set up payroll accounts in the Chart of Accounts
Use the Payroll Setup Wizard to add payroll items,
vendors, employee defaults, employee records, and
year-to-date amounts
Understand the accounting behind the scenes of
payroll items
Use the Custom Setup Wizard to add and edit
payroll items
Release, deactivate, and reactivate employees
Page ref.
103
2
Chapter
3
1.
Payroll Options in QuickBooks
You have four choices for using QuickBooks to track
your payroll.




2.
You can prepare your own payroll manually in QuickBooks
without the use of any tax tables (not recommended)
You can prepare your own payroll using the Do-it-Yourself
Payroll Service which provides the tax tables
You can subscribe to Intuit’s Assisted Payroll Service which
provides payroll tax preparation in addition to the tax tables
You can subscribe to Intuit’s Complete Payroll Service
which provides complete outsourcing of your payroll
For detailed information on the differences between
these options, from the Employees menu, select
Payroll services, and then select Learn About
Payroll Options
Page ref.
103
3
Chapter
3
Objective
Activate the payroll feature
and configure payroll
preferences
4
Chapter
3
1.
2.
3.
4.
5.
6.
7.
8.
9.
Checklist for Setting up Payroll
Gather information about each of your employees, like, name,
address, Social Security Number, and W-4 information
Activate the Payroll function in Preferences
Set up payroll accounts in the Chart of Accounts
Using the Payroll Setup Wizard, set up payroll items, payroll
vendors, employee defaults, employee records, and year-todate payroll figures
Add additional payroll items not covered by the Payroll Setup
Wizard
Edit payroll items to modify the vendor information and the
way the items affect the Chart of Accounts
If setting up mid-year, enter year-to-date information for each
employee and enter year-to-date liability payments
Verify payroll item setup, employee setup, and the vendor list
Use the Payroll Checkup wizard and compare reports with
your accountant’s or payroll service’s reports
Page ref.
103
5
Chapter
3
1.
2.
3.
Activating Payroll
Select the Edit menu, and then select Preferences
Scroll down and click Payroll & Employees.
Click the tab labeled Company Preferences and select Full payroll
features
Page ref.
104
6
Chapter
3
Objective
Set up payroll accounts in the
Chart of Accounts
7
Chapter
3
Payroll Accounts
1.
Payroll Liability
Accounts
2.
Payroll Expense
Accounts
Page ref.
106
8
Chapter
3
Objective
Use the Payroll Setup Wizard
to add payroll items, vendors,
employee defaults, employee
records, and year-to-date
amounts
9
Chapter
3
1.
2.
3.
The Payroll Setup Wizard
The Payroll Setup Wizard
is a set of windows similar
to the Easy Step Interview
that walk you through the
setup of payroll
This Wizard is optional, but
very helpful and works
even if you have existing
payroll
Starting the Payroll Setup
Wizard

Select the Employees
menu, select Payroll
Services, and then select
Set up Payroll
Page ref.
107
10
Chapter
3
1.
2.
3.
4.
Payroll Items define the relationship between Items
you put on paychecks and the Chart of Accounts
QuickBooks uses Payroll Items to track each kind of
compensation, withholding tax, employer tax,
addition, and deduction from paychecks
You will add the Payroll items that you need for your
company, such as payroll taxes, wages, benefits
and other payroll items
Payroll taxes


5.
Payroll Items Setup Using Payroll
Setup Wizard
Start Payroll Wizard
Click Set up payroll taxes
Wages, benefits, and others Payroll items


Start Payroll Wizard
Click Set up wages, benefits, and misc. Payroll Items
Page ref.
110
11
Chapter
3
Setting up Wages, Benefits, and
other Payroll Items
Page ref.
111
12
Chapter
3
Entering Vendors for Payroll
Items
To set up vendors for payroll liabilities, continue with the
payroll Setup Wizard
Page ref.
117
13
Chapter
3
1.
2.
Setting Up Employee Defaults
The Employee Defaults
feature allows you to
define defaults for your
employee records so that
each time you add a new
employee, you don’t have
to enter the same
information over and over
To setup Employee
Defaults:

In Payroll wizard, select
the Enter default payroll
setting for new employees
Page ref.
118
14
Chapter
3
Check Item Order on Additions,
Deductions and Contributions
The order in which you enter Additions, Deductions and
Company Contributions affects how they are calculated on
paychecks
If you enter the addition
before the
deduction…
Salary Regular $1,000.
Tips (Addition)
$100.
(Addition to Gross)
401(k) deduction
2%
(Deduction from Gross)
If you enter the addition
after the
deduction…
Salary Regular $1,000.
401(k) deduction
2%
(Deduction from Gross)
Tips (Addition)
$100.
(Addition to Gross)
QuickBooks calculates the
2% deduction on
a gross of $1,000
+ $100, or
$1,100. The
deduction would
be $1,100 * 2% =
$22.
Salary Regular $1,000.
Tips (Addition)
$100.
Total Gross
$1,100.
401(k) deduction
(2%)
$22.
QuickBooks calculates the
2% deduction on
a gross of
$1,000. The
deduction would
be $1,000 * 2% =
$20.
Salary Regular $1,000.
401(k) deduction
(2%)
$20.
Tips (Addition)
$100.
Page ref.
120
15
Chapter
3
Setting up Employee Records
After you have set
up your Payroll
Items and Employee
Defaults, you can
set up each
employee’s payroll
record:


On the Payroll Setup
window click Setup
Employees
In the Employee
Setup window, click
Add Employee
Page ref.
124
16
Chapter
3
Setting up Year-to-Date Payroll
Amounts
If you were setting up your own payroll in the middle
of the year, you would click Set Up YTD Amounts in
Payroll Wizard window
Page ref.
131
17
Chapter
3
Objective
Understand the accounting
behind the scenes of payroll
items
18
Chapter
3
1.
2.
3.
The Accounting Behind the
Scenes — Payroll Items
Using Payroll Items, QuickBooks tracks the detail it needs to
calculate paychecks, look up taxes in the tax table, prepare detailed
reports, and prepare your payroll tax forms
Payroll Items are set up so that QuickBooks automatically makes all
the accounting entries when you process paychecks and payroll
liability payments
Following Payroll items are used in QuickBooks:

Wage Items
Salary Wage
Hourly Wage

Commission

Bonus

Deduction

Company Contribution

Federal Tax

State Tax

Other Tax
Page ref.
132
19
Chapter
3
Objective
Use the Custom Setup Wizard
to add and edit payroll items
20
Chapter
3
1.
Using the Custom Setup Wizard
When you create a new Payroll Item, QuickBooks gives you
two setup options:


2.
Easy Setup: If you select this option, QuickBooks will take you to
the payroll item setup section of the Payroll Setup Wizard
Custom Setup: If you choose this option, QuickBooks will open
the Custom Setup wizard.
The Custom Setup wizard allows you to






Enter information and to edit fields not available in the Payroll
Setup Wizard
Add Payroll Items
Add an Earning (Wage) Item
Edit Payroll Items
Add Medical Insurance Deduction
Add 401(k) Employee Deduction and Company Match Items
Page ref.
135
21
Chapter
3
Objective
Release, deactivate, and
reactivate employees
22
Chapter
3
1.
2.
Releasing Employees
When you release an
employee, edit the
employee record and
fill in the Released
field with the date on
which the employee
separated from the
company
A released employee
no longer appears in
the Select Employees
to Pay window when
you run your payroll
Page ref.
150
23
Chapter
3
1.
2.
3.
4.
5.
Deactivating Employees
To deactivate an employee,
select the employee in the
Employee list and then select
Make Inactive from the
Employee menu at the bottom
of the list
This removes the employee
from the list, but it doesn’t
delete the employee from
your company file
Deactivated employees show
an “ x “ icon
To reactivate an employee,
click on the “ x “ icon in the
Employee List
To view all employees
(including deactivated ones),
click Show All
Page ref.
151
24
Chapter
3
The Employee Contact List
report
Select the Reports menu, select List, and then
select Employee Contact List
Page ref.
151
25
Chapter
3
1.
2.
3.
4.
5.
6.
Summary of Key Points
Activate the payroll feature and configure payroll
preferences
Set up payroll accounts in the Chart of Accounts
Use the Payroll Setup Wizard to add payroll items,
vendors, employee defaults, employee records, and
year-to-date amounts
Understand the accounting behind the scenes of
payroll items
Use the Custom Setup Wizard to add and edit
payroll items
Release, deactivate, and reactivate employees
Page ref.
153
26