Introduction

Note: If you’re a new Accounting Analytics’ payroll client, we set up and customize your QuickBooks Online Payroll (QuickBooks Payroll). Therefore, this chapter may be disregarded. However, if you do set up your QuickBooks Payroll, we suggest you do so under the direction of your accountant.

This chapter is for QuickBooks Payroll users who purchased this Guide to enable them to perform their company’s payroll with QuickBooks Payroll using our Accounting System’s payroll process.

The chapter assumes you subscribed to and set up a QuickBooks account and are adding QuickBooks Payroll Core to that account. If you haven’t subscribed to and set up a QuickBooks account, see our Accounting Analytics Bookkeeper Guide.

Before you start performing our payroll process, you need to set up your payroll in QuickBooks Payroll.  

Remember, the objectives of the Guide are to enable you to:

1. Efficiently, accurately, and productively perform payroll,

2. Provide timely, relevant, and reliable payroll information, and

3. Increase their financial position, profit, and cash flow.

Therefore, although setting up QuickBooks Payroll is primarily a one-time event, how you set up QuickBooks Payroll determines what you get from QuickBooks Payroll. If you want to achieve the objectives above, you need to be thoughtful and thorough in how you set up QuickBooks Payroll. As the saying goes, Begin with the end in mind.

Setup Tools

The following tools are needed to set up your company on QuickBooks Payroll:

• QuickBooks (required for bookkeeping and payroll seamless integration),
• QuickBooks Payroll (can be a standalone service),

• Company online bank account(s) compatible with QuickBooks, and
• Company one sheet, two-part voucher QuickBooks compatible checks, if you issue payroll checks. However, we suggest you use direct deposit.

Bookkeeper Tasks

Your payroll setup tasks include:

1. Gather QuickBooks Payroll setup information,

2. Subscribe to QuickBooks Payroll, and

3. Set up your payroll.

Accountant Tasks

Your accountant’s payroll setup tasks include:

1. Provide QuickBooks Payroll setup training,

2. Support QuickBooks Payroll setup questions or problems, and

3. Review your QuickBooks Payroll setup.

Gather QuickBooks Payroll Setup Information

To expedite the setup process, you need to gather the information required to set up your payroll.

When setting up your payroll in QuickBooks Payroll you will complete a To Do list comprising 6 items:

1. Payroll Information,

2. Business Information,

3. Employee Information,

4. Tax Information,

5. Connect to Your Payroll Bank Account, and

6. Sign Your Tax Forms.

QuickBooks Payroll Information Checklist

The following is a checklist of the information you need for each step to complete your setup:

Step 1 – Payroll Information

1. Payroll history: Have you paid employees in 20XX (current tax year), yes or no?

2. Next payday: When is your next payday (month, day, and year)?

Step 2 – Business Information

1. Primary work location: business name, address, city, state and zip code.

2. Payroll contact: first and last name, business phone number, and email address.

Step 3 – Tell Us About Your Team

1. Any existing W-4 forms from your employees

2. Information on each employee, including the following:

• First and last name and email address
• Pay schedule

• Employee type (hourly, salary, commission) and pay rate
• Time Off Policies that apply, as well as time off policies your company uses (vacation, sick time, PTO), including the total number of hours an employee can earn each year and maximum hours to be earned (if applicable)

A Time off Policy refers to benefits you offer your employees regarding leave, both paid and unpaid.

• Deductions and benefits that apply, as well as any deductions or contributions your company offers, such as such as health insurance plans (medical, dental or vision), retirement plans, Flexible Spending Accounts (FSA), Health Spending Accounts (HSA), and others.

You will also need the amount deducted/contributed per pay period, and the annual maximum amount (if applicable)

• Payment method (printed check, direct deposit to one or multiple accounts, or a combination)
• Birth date and hire date
• Year-to-date pay information, including totals for regular wages, federal income tax, social security, Medicare, state income tax, and net pay (optional).

Step 4 – Add a Workers’ Comp Policy

1. Worker’s comp policy, if applicable.

Step 5 – Fill In Your Tax Info

1. Business name and address used when filing tax forms (as shown on record with the IRS)

2. Previous business owner info (if applicable)

3. Title of the company’s Principal Officer

Your principal officer is the main contact for the company bank account and the person who’s authorized to communicate with federal and state tax agencies. This is typically the owner.

4. Employer Identification Number (EIN)

If you started a new business or hired employees.

If you don’t have an EIN,  you can complete the SS-4 Application by going to https://sa.www4.irs.gov/modiein/individual/index.jsp.

5. Federal tax filing requirement and deposit schedule

Your deposit schedule is based on your total tax liability and is typically provided to you by the IRS before the calendar year begins. If you’re unsure of your deposit schedule, see Publication 15 (Employers Tax Guide), which can be located on the IRS website. The most common form used is Form 941. See Chapter 6 – Processing Payroll Taxes and Quarterly Forms for federal tax filing requirement and deposit schedule information.

6. Company type (sole proprietor, 501c3, corporation, LLC, etc.)

7. Employer Account Number and Registration Number

If you don’t have an Employer Account Number, you’ll need to request one from your state’s Employment Development Department (EDD). Some EDD’s have a website that allow you to register and obtain your Employer Account Number online. It’s not recommended to file or pay taxes without this, as you run the risk of not receiving credit for the payment.

8. State Unemployment Insurance (SUI) rate

You can contact the EDD to obtain this information if you don’t have it already.

9. State tax deposit schedule

Your state deposit schedule will typically be provided with the information regarding your Employer Account Number.

Step 6 – Connect to Your Payroll Bank Account

1. Industry type

Your industry type is your company’s area of expertise or the products or services you offer.

2. Business owner’s first and last name, address, date of birth, mobile phone number, and last 4 digits of SSN

3. Company online bank account information (bank account payroll is paid from), including the financial institution’s login information

Step 7 – Sign Your Tax Forms

1. Company’s principal officer first and last name.

2. Principal officer’s mobile phone number (must be registered in the name of the officer).

Subscribe to QuickBooks Tools

Subscribe to QuickBooks Online Payroll

Note: Accounting Analytics’ payroll service fee includes your QuickBooks Payroll subscription.

To subscribe to QuickBooks Payroll, while in your QuickBooks account, select Payroll on the left menu and select Get Started.

You can also subscribe to QuickBooks Payroll in the Company Settings under Your Company.

1. Select the Gear icon,

2. Under Your Company, select Account and Settings,

3. Select Billing & Subscription.  

Set Up Your Payroll

After gathering your payroll information and subscribing to QuickBooks Payroll, you are ready to set up your payroll.

Note: To edit your payroll settings after you have completed the following steps, select the Gear icon, then Payroll settings.

Step 1 – Payroll Information

To begin QuickBooks Payroll setup:

1. Login to your QuickBooks account.

2. Select Payroll, then Overview on the left menu.

3. Select Get started.  

4. You are asked: Have you paid employees in 20XX (the current year). Select No or Yes, then Next.

5. You are asked: When is your next payday? Select the date, then Done.

You have competed Step 1 - Payroll Information.

Step 2 – Business Information

1. You are asked: What’s the primary work location? Enter your business name, address, city, state, and ZIP code, then select Next.

2. You are asked: Who’s your payroll contact? Enter the contact’s first name, last name, business phone, and email address, then select Done.

You have competed Step 2 - Business Information.

You are brought back to the Payroll, Overview page.

The Overview page now contains a To Do list, which lists the remaining items to be completed.

Step 3 – Tell Us About Your Team

To set up your employees:

1. On the To Do list, step 3, Tell us about your team, select Start to begin entering your first employee.

2. For item 1, Personal info, enter the employee’s personal information.

Entering the employee’s email will set them up on QuickBooks Workforce. Workforce enables your employees to view and print their pay stubs and W-2s from the current tax-filing season. Each time you run payroll, employees set up on Workforce get an email letting them know they can view their pay stubs and W-2 online.

3. Check the box to ask the employee to enter their own information. This will send them an email that will direct them through the process of entering their own information, including Form W-4 information. Once the employee has completed the self-setup, the information will be automatically uploaded into QuickBooks Payroll.

4. For item 2, What are this employee’s employment details?, enter the employee’s Hire date and select the Work location from the drop-down menu.

You can select New Work Location to add another work location. Enter the details then select Add location.

5. For item 3, How often do you pay this employee?, select Create pay schedule.

6. Enter the employee’s pay schedule information.

Be sure to check the Use this schedule for employees you add after this one if multiple employees are on the same pay schedule.

7. For item 4, How much do you pay this employee?, select the employee’s pay type from the drop-down menu and enter the employee’s pay.

8. (Optional) Enter the default hours per day and days per week if the employee works the same schedule each week. This can help automate certain payroll tasks.  

9. Select Add additional pay types to enter additional pay type information (overtime, sick pay, vacation, etc.).

10. Select the check boxes next to any applicable Common pay types.

11. For Time off pay policies, select the Add new policy option from the drop-down menu to create a policy. Enter how Hours are accrued, the Hours per year, and the Maximum allowed (optional), then select Save.

Repeat for each type of Time off policy used.

12. Complete any additional pay information, then select Save.

13. For item 5, Does this employee have any deductions?, if the employee has a deduction, select a deduction from the list of deductions you have added and enter the deduction information.

If the deduction isn’t listed, select Add deductions.

14. Select Add a deduction/contribution to add a new deduction or contribution.

15. On the Add deduction/contribution page, fill out the fields as shown below.

Note: Different fields will appear depending on the deduction or contribution selected.

16. Select Save, then continue to add additional deductions or contributions as needed.

17. Select Add garnishment to add a new garnishment.

18. On the Add deduction/contribution page, fill out the fields as shown below.

19. Select Save, then continue to add additional garnishments as needed.

20. Once all deductions, contributions, and garnishments have been added, select Done.

21. Continue to item 8, How do you want to pay this employee?, and select the method you use to pay the employee from the drop-down menu.

Note: Items 6 and 7 will be completed by the employee by following the instructions in their email.  

If the payment method is direct deposit, the employee will be invited to provide their bank information and provide authorization.

22. Review items 1 through 8 for accuracy, then select Done at the bottom of the page.

23. Select Add next employee to add another employee and repeat the steps above. Continue to do this for all employees, then select Done.  

24. In the window that appears, select Continue setup to proceed to step 4.

Step 4 – Add a Workers’ Comp Policy

1. You are asked: Do you have workers’ comp? Select Yes or No, then Next.  

Step 5 – Fill In Your Tax Info

To fill in your tax info:

1. On the To Do list, step 5, Fill in your tax info, select Start.

2. On the General info page, verify or enter your general business info as shown, then select Next.

3. On the Federal info page, enter your Employee Identification Number.  

4. Select the payroll tax form your company files from the drop-down menu.

5. Select your company’s deposit schedule from the drop-down menu.

6. Select Next.

7. On the State info page, enter your State Account Number.  

8. Select your state deposit schedule from the drop-down menu.

9. Enter your Employer’s Registration Number.

10. For the SUI rate, select Yes and enter the percentage rate in the field.

11. Select Done.

Step 6 – Connect Your Bank

To connect your Bank Account (bank account payroll is paid from):

1. On the To Do list, step 6, Connect your bank, select Start.

1. Select Get started.

2. Select the Business tile.

3. Review your business information for accuracy and fill in any incomplete fields.

4. Select your Industry category from the drop-down menu, then select your Industry type from the drop-down menu.

Your industry type is your company’s area of expertise or the products or services you offer.

5. Select Next to move to the Principal officer tile.

6. Verify or enter the Owner’s first and last name.

7. Enter the Owner address, Apt/Ste/Unit (if applicable), and ZIP.

8. Enter the Owner’s date of birth, Mobile phone number, and Last 4 digits of SSN.

9. Select Next move to the Bank account tile.

10. Select Add new bank account.

11. In the Add a new bank window, enter the name of your financial institution in the search bar and select it from the list.

12. Select Continue to be taken to your bank’s website, then enter your online bank account Username and Password to connect your account.

13. When all three tiles are completed, select Accept and Submit.  

Step 7 – Sign Your Tax Forms

To sign your tax forms:

1. Select Let’s go on your To Do list next to “Sign your tax forms”.

2. On the following page, select Paid or Not Paid for any current tax payments listed, then select Continue.

If you select Paid, the payment will be recorded. If you select Not paid, a reminder will appear on your To Do List (on the Payroll Overview page).

3. When asked if you made all your tax payments in the previous quarters, select Yes or No, then select Continue to e-sign.  

4. When prompted to verify and sign, select Verify.

5. Enter your mobile phone number and select Continue.

6. When you receive the code, enter it into the appropriate field and select Continue.

7. Review the documents on the page, then select the box.

8. Select Done.

Additional Payroll Settings

After you complete the To Do list, there’s one additional payroll setting to complete. Hourly employees need to be set up to track their time.

Set Up Employees to Track their Time

Employees are generally classified based on how they are paid or the type of work they do.

Examples of employees classified based on how they are paid are hourly and salaried employees.

The main difference between hourly and salaried employees is as follows:

• An employee who is paid a wage for each hour of work is an hourly worker. Hourly workers track their time (hours) to determine how much they are to be paid each pay period. Hourly workers are also paid time and a half for any hours worked over 40 hours in a week. Thus, they also track their time to determine how much overtime they’re to be paid each pay period.
• An employee who is paid a salary for each year of work is a salaried employee. Salaried employees may not track their time because the amount they are paid each pay period is the same amount (salary/number of pay periods) and they generally don’t receive overtime pay.

Examples of employees classified based on the type of work they do are exempt and non-exempt employees.

The main difference between exempt and non-exempt employees is as follows:

• Many salaried employees are exempt employees. Exempt employees are exempt from the overtime rules outlined by the Fair Labor Standards Act. Therefore, employers don’t generally track the hours worked by salaried employees or compensate them for extra hours worked.
• If a salaried employee is classified as a non-exempt worker under the Fair Labor Standards Act, the employer must pay them time and a half for any hours worked over 40 hours in a week. They may track their time to determine how much overtime they’re to be paid each pay period.

Other examples of employees who track their time include attorneys, who track their time by client to know how much to bill each client and construction employees who track their time by job to know how much to charge each job.

You can set up your employees to track their time in QuickBooks Online Essentials and Plus. When an employee enters their time, the time automatically integrates with QuickBooks Payroll and QuickBooks Payroll calculates the employee’s payroll. It can also automatically integrate with your invoices.

Note: For more robust time tracking, you may consider the QuickBooks Time app by QuickBooks.

Employees can track their time with one of two timesheets: Single Time Activity and Weekly Timesheet. Single Time Activity is used for entering a single day or event at a time. Weekly Timesheets are used for entering or viewing activities over several days. Time entered in Single Time Activity feeds into the Weekly Timesheet.  

Employees access the time tracking page by logging into the company’s QuickBooks account using a User ID and Password you set up when adding employees to track their time. When they log in, they access the QuickBooks time tracking page and enter their time.

To enable your employees to access the time tracking page, you must set up each employee as a Time tracking only user in the Manage Users page.

To add an employee to track their time:

1. Select the Gear icon on the Toolbar and select Manage Users.

2. On the Manage users page select Add user.

3. On the Add a new user page select Time tracking only and select Next.

4. Enter or select the employee’s name from the Select employee or vendor drop-down menu and select Next.

5. Enter the employee’s first name, last name, and email address. The email address will be the employee’s User ID.

6. Select Save.

The employee receives an email that invites them to create a QuickBooks account and password and to access the time tracking home page.

To edit a user’s settings:

1. Select the Gear icon on the Toolbar and select Manage Users.

2. Locate the employee’s name on the user list and select the edit link in the Action column.

To view user activity or delete the users:

1. Select the Gear icon on the Toolbar and select Manage Users.

2. Locate the employee’s name on the user list and select the down arrow in the Action column.

We suggest you have a policy for employees who track their time to track their time on a daily basis. An employee’s time is more accurate when entered daily, company reports are more accurate, and the company may improve cash flow by billing or charging time entered to clients or customers daily.

We have created QuickBooks time tracking instructions you can email employees who track their time using QuickBooks time tracking. See Appendix 3.a – QuickBooks Time Tracking Instructions.