How to Do Payroll in QuickBooks Online in 7 Steps

If you are already using QuickBooks Online and 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 get 50% off payroll for the first three months. Sign up for QuickBooks Payroll today.

Visit QuickBooks Payroll

Payroll Setup Checklist: Info 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. Here is a checklist that you can use to ensure you have both the employer and employee data needed.

Employer Information

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 used for your day-to-day business operations.

Employee Information & Documents

Employee information and hire date: You need basic information about your staff members, such as their legal names, birth dates, and hire dates.
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. The same goes for QuickBooks in which its setup wizard guides you through the whole process. If you want to watch the process in action, check out our QuickBooks Payroll setup video.

Step 1: Navigate to Payroll

After having logged in to your QuickBooks account, you’ll want to navigate to the “Payroll” tab to get started.

Showing three options when you hover on payroll tab.

Hovering over the “Payroll” tab, you’ll see three options: Employees, Contractors, and Workers’ comp. You can explore each of these options, but we’re going to get started with 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. If you are just 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.

Step 2: Enter General Information About Paying Your Employees

In the next step, the system will ask whether or not you already paid employees in 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.”

Showing have you paid employees in 2021 question.

Newly established businesses that have yet to run their first payroll can select “No” and then click “Next.”

Note that the system will require you to input year-to-date (YTD) payroll details and tax payments made for each employee later 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 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.

Step 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.

Step 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, QuickBooks Time.

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, 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 to 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.
YTD payroll information: If you paid the employee this 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 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.

Entering personal info and other details in QuickBooks.

After entering your employee’s name, you can provide their email address, which will allow them to enter their tax information (W-4) and bank account details directly into QuickBooks.

Showing how often and how much do you pay an employee sections.

In the “How much do you pay (employee)'' section, you can click the “add additional pay types” for any employees who require it.

Reviewing information entered by clicking on each sections.

You can review the information that you entered by clicking each section. Once all the required fields have been completed, click “Done.”

It is extremely important that you ensure the YTD totals are accurate. This information will be crucial to ensure that your reporting is both accurate and reliable. This information will also 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.

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 all of the pay details are correct. If you have new employees or have accidentally left someone out, click the “add an employee” button.

Correcting on the list by clicking on the employee name.

If you spot something on the list that needs to be corrected, click the employee’s name to edit.

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.

After you have completed setting up payroll in QuickBooks, you can now process your first pay run. Follow these steps on how to do payroll in QuickBooks Online.

Step 5: Click “Run Payroll”

Go to your “Payroll” dashboard and click the “Run payroll” button located in the right-hand corner of the screen.

Step 6: 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.

Step 7: Review & 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. If you’re using QuickBooks Online for your accounting software, a bill will automatically be created for each payroll processed, making reconciling your payroll account a breeze. For more information, check out our guide to reconciling in QuickBooks.

Showing payroll dashboard also contains list of the employees that was set up.

The “Payroll” dashboard also contains a list of the employees that you set up, along with important payroll-related reminders.

Entering hours for all hourly employees.

From the payroll screen, you can enter hours for all hourly employees. For salaried employees, you won’t see the hours worked, just the total amount due to be paid for that period.

Reviewing payroll before clicking submit.

While reviewing your payroll, make sure that you check the net pay and both the employer and employee tax amounts for reasonableness. When everything looks good, click “Submit Payroll” to complete.

For more general help with processing payroll, check out our payroll training tips.

Bottom Line

By following these seven simple steps, you can get your account set up and your payroll processed in just a few minutes. 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 within the platform, plus you are granted access to full-service pay processing solutions including health insurance and benefits options for your workforce. New users get 50% off payroll for the first three months. Sign up for QuickBooks Payroll today.