1. McGraw-Hill/Irwin Introduction to QuickBooks Pro, 2004 © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 8 Payroll Setup

2. Chapter 8 Textbook page ref. 2 Objectives 1. Activate the payroll feature and configure payroll preferences 2. Set up payroll accounts in the Chart of Accounts 3. Use the Payroll Setup Wizard to add payroll items, vendors, employee defaults, employee records, and year-to-date amounts 4. Understand the accounting behind the scenes of payroll items 5. Use the Custom Setup Wizard to add and edit payroll items 6. Release, deactivate, and reactivate employees 337

3. Chapter 8 Textbook page ref. 3 Payroll Options in QuickBooks 1. You have four choices for using QuickBooks to track your payroll.  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 2. For detailed information on the differences between these options, from the Employees menu, select Payroll services, and then select Learn About Payroll Options 337

4. Chapter 8 4 Objective 1. Activate the payroll feature and configure payroll preferences

5. Chapter 8 Textbook page ref. 5 Checklist for Setting up Payroll 1. Gather information about each of your employees, like, name, address, Social Security Number, and W-4 information 2. Activate the Payroll function in Preferences 3. Set up payroll accounts in the Chart of Accounts 4. Using the Payroll Setup Wizard, set up payroll items, payroll vendors, employee defaults, employee records, and year-to- date payroll figures 5. Add additional payroll items not covered by the Payroll Setup Wizard 6. Edit payroll items to modify the vendor information and the way the items affect the Chart of Accounts 7. If setting up mid-year, enter year-to-date information for each employee and enter year-to-date liability payments 8. Verify payroll item setup, employee setup, and the vendor list 9. Use the Payroll Checkup wizard and compare reports with your accountant’s or payroll service’s reports 338

6. Chapter 8 Textbook page ref. 6 Activating Payroll 1. Select the Edit menu, and then select Preferences 2. Scroll down and click Payroll & Employees. 3. Click the tab labeled Company Preferences and select Full payroll features 338

7. Chapter 8 7 Objective 2. Set up payroll accounts in the Chart of Accounts

8. Chapter 8 Textbook page ref. 8 Payroll Accounts 1. Payroll Liability Accounts 2. Payroll Expense Accounts 341

9. Chapter 8 9 Objective 3. Use the Payroll Setup Wizard to add payroll items, vendors, employee defaults, employee records, and year-to-date amounts

10. Chapter 8 Textbook page ref. 10 The Payroll Setup Wizard 1. The Payroll Setup Wizard is a set of windows similar to the Easy Step Interview that walk you through the setup of payroll 2. This Wizard is optional, but very helpful and works even if you have existing payroll 3. Starting the Payroll Setup Wizard  Select the Employees menu, select Payroll Services, and then select Set up Payroll 341

11. Chapter 8 Textbook page ref. 11 Payroll Items Setup Using Payroll Setup Wizard 1. Payroll Items define the relationship between Items you put on paychecks and the Chart of Accounts 2. QuickBooks uses Payroll Items to track each kind of compensation, withholding tax, employer tax, addition, and deduction from paychecks 3. You will add the Payroll items that you need for your company, such as payroll taxes, wages, benefits and other payroll items 4. Payroll taxes  Start Payroll Wizard  Click Set up payroll taxes 5. Wages, benefits, and others Payroll items  Start Payroll Wizard  Click Set up wages, benefits, and misc. Payroll Items 345

12. Chapter 8 Textbook page ref. 12 Setting up Wages, Benefits, and other Payroll Items 347

13. Chapter 8 Textbook page ref. 13 Entering Vendors for Payroll Items To set up vendors for payroll liabilities, continue with the payroll Setup Wizard 352

14. Chapter 8 Textbook page ref. 14 Setting Up Employee Defaults 1. 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 2. To setup Employee Defaults:  In Payroll wizard, select the Enter default payroll setting for new employees 353

15. Chapter 8 Textbook page ref. 15 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) deduction2% (Deduction from 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. 355 If you enter the addition after the deduction… Salary Regular$1,000. 401(k) deduction2% (Deduction from Gross) Tips (Addition)$100. (Addition to Gross) 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.

16. Chapter 8 Textbook page ref. 16 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 360

17. Chapter 8 Textbook page ref. 17 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 368

18. Chapter 8 18 Objective 4. Understand the accounting behind the scenes of payroll items

19. Chapter 8 Textbook page ref. 19 The Accounting Behind the Scenes — Payroll Items 1. 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 2. Payroll Items are set up so that QuickBooks automatically makes all the accounting entries when you process paychecks and payroll liability payments 3. Following Payroll items are used in QuickBooks:  Wage Items Salary Wage Hourly Wage  Commission  Bonus  Deduction  Company Contribution  Federal Tax  State Tax  Other Tax 369

20. Chapter 8 20 Objective 5. Use the Custom Setup Wizard to add and edit payroll items

21. Chapter 8 Textbook page ref. 21 Using the Custom Setup Wizard 1. When you create a new Payroll Item, QuickBooks gives you two setup options:  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. 2. 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 372

22. Chapter 8 22 Objective 6. Release, deactivate, and reactivate employees

23. Chapter 8 Textbook page ref. 23 Releasing Employees 1. 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 2. A released employee no longer appears in the Select Employees to Pay window when you run your payroll 390

24. Chapter 8 Textbook page ref. 24 Deactivating Employees 1. 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 2. This removes the employee from the list, but it doesn’t delete the employee from your company file 3. Deactivated employees show an “ x “ icon 4. To reactivate an employee, click on the “ x “ icon in the Employee List 5. To view all employees (including deactivated ones), click Show All 391

25. Chapter 8 Textbook page ref. 25 The Employee Contact List report Select the Reports menu, select List, and then select Employee Contact List 392

26. Chapter 8 Textbook page ref. 26 Summary of Key Points 1. Activate the payroll feature and configure payroll preferences 2. Set up payroll accounts in the Chart of Accounts 3. Use the Payroll Setup Wizard to add payroll items, vendors, employee defaults, employee records, and year-to-date amounts 4. Understand the accounting behind the scenes of payroll items 5. Use the Custom Setup Wizard to add and edit payroll items 6. Release, deactivate, and reactivate employees 393