If you’re already using QuickBooks Online and you need to pay employees, consider adding QuickBooks Payroll to your plan. You can access it from the same system you use to manage your business’ books, allowing for the seamless transfer of your payroll expenses to the appropriate general ledger accounts.
With just a few simple steps, you can set up payroll in QuickBooks Online and process your first pay run. You can even do payroll as often as you need at no extra charge—provided you subscribe to a QuickBooks Payroll plan.
Further, adding QuickBooks Payroll to your existing QuickBooks Online subscription means that your business is granted access to other HR and pay processing features such as next- and same-day direct deposits, employee benefits, and automated tax calculations and filings. New users can also try out the system free for 30 days. Sign up for QuickBooks Payroll today.
Payroll Setup Checklist: Info You Need to Have on Hand
Before you can set up and do payroll in QuickBooks, you need to have both employer and employee details on hand so that the setup can run smoothly. In this article, we’ll guide you through the process, so you know when to use the information. Here is a checklist that you can use to ensure you have both the employer and employee data needed.
Employer Information You’ll Enter in QuickBooks Payroll
- Employee compensation types: You’ll input info.—such as overtime, paid-time-off (PTO), bonuses, and commissions—that you regularly provide your staff.
- Employee benefits options: You have to specify which employee benefits you provide. Note that with QuickBooks Payroll, access to health benefits is included in all plans. It also offers 401(k), retirement, flexible spending account (FSA), and pay-as-you-go workers’ compensation options.
- Business bank account information: Aside from the account number, you need the full routing number of the checking account that you will make payroll tax payments and write payroll checks from.
You should have a separate payroll account from the checking account that is used for your day-to-day business operations.
Employee Information and Documents You’ll Use to Enter Data in QuickBooks Payroll
- Employee information and hire date: You need basic information about your staff members, such as their legal names, birth dates, and the date they were hired.
- Pay rate and schedule: You can set up multiple pay schedules in QuickBooks, if needed.
- Paycheck deductions: You should have a list of your employees’ contributions to health insurance, retirement plans, and garnishments.
- Form W-4: Upon hiring new employees, you need to have them complete and sign a W-4 form so you can enter their withholding information and other pertinent details that you need to correctly calculate payroll tax deductions.
- Payroll history: If you already paid employees within the current calendar year, you should have your prior payroll data on hand to ensure accurate tax calculations.
- Direct deposit authorization form: If you pay employees via direct deposit instead of paper checks, you must have them complete a direct deposit authorization form.
- PTO policy and balance: If you offer vacation and sick pay, you need to know the total number of PTO hours you’re allocating to each employee for the year.
If you are converting to QuickBooks Payroll in the middle of a calendar year, you should enter the total sick and vacation hours an employee had from your previous system.
Most online payroll services offer an intuitive interface that makes payroll setup easy for users. The same goes for QuickBooks in which its setup wizard guides you through the whole process. You can even complete the setup in just a few simple steps.
If you want to watch the process in action, check out our QuickBooks Payroll setup video.
1. Navigate to Payroll
After having logged in to your QuickBooks account, go to “Payroll” and click “Employees.” If you just purchased your QuickBooks Online subscription, you’ll see a “Get Started” button. Click on it to proceed to the next screen.
Hover over the “Payroll” button located midway through the list of navigation options in the left menu bar and then click “Employees.”
If you already have access to QuickBooks Payroll but have yet to use it, you won’t see the “Get Started” button. Instead, the screen will show that you need to set up payroll.
If you are just now signing up for QuickBooks Payroll, the system will ask you a few questions, such as if you require HR support and need to track employee work hours. While these questions will help match you with the right plan, you also have the option to manually select one of its three payroll options yourself.
QuickBooks will recommend the best payroll plan for you, and you can even sign up for a 30-day free trial.
For more information on how QuickBooks Payroll’s automated payroll and direct deposit work, including other features that you and your employees may need, check out our QuickBooks Payroll review.
2. Enter General Information About Paying Your Employees
In the next step, the system will ask whether or not you already paid employees within the current calendar year. If you’re switching to QuickBooks Payroll from either a manual system or another payroll software, then you need to click “Yes.”
Note that the system will require you to input year-to-date (YTD) payroll details and tax payments made for each employee later on in the setup. Providing information about prior paychecks issued to employees before the beginning of your QuickBooks Payroll subscription is an essential step to ensure that your W-2 forms are accurate come year-end.
You can get YTD information from the last payroll that you processed for each employee. You can also request detailed pay reports from your previous payroll provider.
Aside from payments to employees in the current calendar year, the system will ask you to indicate the date that you plan to run your first payroll in QuickBooks. It will also require you to enter the physical address where the majority of your employees work.
3. Add Employees
After you have entered your work location, a new window will appear that lets you add your employees’ basic information and payroll details into the system. Click the “Add an employee” button and start inputting the required data of each staff member on your payroll, including those who are no longer employed with your company but were paid within the current calendar year.
4. Complete Employee Information
As you add basic staff information into QuickBooks, you have the option to input your employees’ email addresses. This allows the system to send them a link to view their pay stubs and W-2s via QuickBooks Workforce, the provider’s self-service online portal. There’s even an option for the system to invite employees to track and record their work hours via QuickBooks Time.
Note, however, that you need a subscription to QuickBooks Payroll’s premium plans to access the time tracking solution.
Here’s a list of the employee information fields you need to fill in to complete the QuickBooks Online Payroll setup.
- Pay schedule: Specify a pay schedule for your employees by clicking the “create pay schedule button” in the “How often do you pay (employee)” section. In the dropdown button, select the applicable schedule, such as weekly, twice a month, and monthly, among others. You will also be provided the option to use the schedule you just created as the default schedule for succeeding employees who will be added into the system.
- Employee pay: Enter the employee’s wage in the “How much to do you pay (employee)” section. You also have to input the staff’s default number of work hours in a day and workdays in a week.
- Employee deductions/contributions: In the “Does (employee) have any deductions” section, select the applicable contribution and deduction items.
- Employee withholding information: The “What are (employee’s) withholdings” section is where you will use the information from Form W-4s. When you click “Enter W-4 form,” select whether you need the current year’s tax form or an earlier version. As of this writing, the form changed in December 2020, and QuickBooks stores both new and old versions. This enables you to print one directly from the system to give to employees and capture the correct information.
- Enter YTD payroll information: If you paid the employee this current year, use the information from the last payroll check issued and input the YTD payroll details into the system. Note that QuickBooks will ask for totals paid in prior quarters of the current year and any amounts paid within the current quarter but before you began using QuickBooks Payroll.
- Payment method: The “How do you want to pay (employee)” section contains a dropdown button where you can select either direct deposit or (manual) check to pay the employee. If you select direct deposit, use the information from the direct deposit authorization form and the voided check that you requested from the employee.
It is extremely important that you ensure the YTD totals are accurate. This information will impact federal and state taxes that have an annual maximum, including limits on contributions to 401(k) and retirement accounts. To learn more about deduction and contribution limits, check our how to do payroll guide.
Coronavirus Pay Features
QuickBooks Payroll has a coronavirus pay feature under the “How much do you pay (employee)” section. It allows you to classify paid leaves taken by employees due to coronavirus. If you’re planning to take a tax credit against the employees’ wages under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, then you need to select this as well.
Once you have completed all of the necessary information for each employee, you will see a list of employees on your payroll for the year. Review it carefully and make sure that all of the pay details are correct. If you have new employees or have accidentally left someone out, click the “add an employee” button.
Now that you’ve set up employees in the system, don’t forget to configure your company’s tax information. Check out our article on payroll tax setup in QuickBooks if you need help.
How to Run Payroll in QuickBooks Online
After you have completed setting up payroll in QuickBooks, you can now process your first pay run. Follow these three steps on how to do payroll in QuickBooks Online.
1. Click “Run Payroll”
Go to your “Payroll” dashboard and then click the “Run payroll” button located in the right-hand corner of the screen.
2. Enter Current Hours
In the “Regular Pay Hrs” column, enter the actual hours worked for all hourly employees and then review other information to ensure accuracy. Once you’re done, select the “Preview Payroll” button located in the bottom right corner.
Note that the system will automatically populate the total hours based on the default number of work hours you entered for an employee during the initial setup. If there are changes to the staff’s working hours, feel free to update it in the system.
3. Review and Submit Payroll
This step is your last chance to review and edit the payroll information before finalizing it. Aside from the total hours worked and other pay details, check the payment method to ensure that employees who should be paid by direct deposits and paychecks show correctly. Also, review both the employer and employee tax amounts.
If you’re satisfied that everything is correct, click the “Submit Payroll” button that is at the bottom right of the screen. You can then print payroll checks and/or direct deposit remittance advice to distribute to employees.
For more general help with processing payroll, check out our payroll training tips.
QuickBooks Online users who need a payroll solution don’t need to find another software provider for their pay processing needs. You can easily set up payroll in QuickBooks Online, plus you are granted access to full-service pay processing solutions including health insurance and benefits options for your workforce. If you haven’t signed up for QuickBooks Payroll, you can try it out for free for 30 days.