How To Do Payroll In QuickBooks Online
As a small business owner, you know the importance of getting paid. After all, you rely on your customers or clients to make sure you’re paid on time so you can put money into your business and pay yourself a salary. If you have employees, they also expect to get paid their wages on time. In fact, paying your employees late isn’t just bad etiquette … it’s also illegal and could lead to fines and other legal consequences.
Fortunately, making sure that your employees are paid on time every time is easier than ever with accounting software that boasts payroll capabilities. One of the biggest out there? QuickBooks Online. Millions of business owners rely on QuickBooks Online for balancing the books, tracking inventory, and performing other tasks, including payroll.
If you already use QuickBooks Online, you’re in luck. Getting started is quick and easy. While QuickBooks Payroll can be accessed directly through your QBO dashboard, you do have to sign up for the service. QuickBooks Payroll costs an additional fee (more on that later), but you can take advantage of a 30-day free trial to make sure the service is right for you.
If you’re ready to set up your payroll to ensure your employees are paid on time, while also remaining compliant with payroll tax laws, keep reading. We break down each step of signing up, setting up, and running payroll quickly and easily through QuickBooks Online — no prior payroll experience required!
Table of Contents
What You Need To Run Payroll In QuickBooks Online
Before you sit down and get started, there are a few items you need to have handy in order to successfully and accurately set up and run payroll through QuickBooks Online. Unsure of why you need each item on this list? Not to worry — in the next section, we’ll break down exactly when to use each item.
- Personal Info For Employees
- Employee Pay Rates
- Employee Deductions
- Employee W-4s
- Direct Deposit Authorization Forms & Voided Checks
- Business Bank Account Login Information
- Basic Information About Your Business
Not only can you set up payments via QuickBooks for each employee, but you can also take a few extra steps to make sure that payroll taxes are accurately calculated and paid. In order to do this, have the following information (in addition to the items listed above):
- Federal EIN
- State Account & Withholding Numbers
- Workman’s Comp Policy Information
How To Set Up Payroll In QuickBooks Online
After you’ve gathered everything you need, it’s time to set up your payroll. Depending on the number of employees you have, this process can be time-consuming, so make sure you’ve set aside plenty of time to make sure everything is input correctly. Though these steps can take some time to complete for each employee, the good news is that it’s all very simple and straightforward, so it shouldn’t be a problem — even if you’ve never set up payroll before.
Step 1: Sign Up For Payroll
In order to run payroll through QuickBooks Online, you have to sign up for QuickBooks Payroll. This is actually quite easy and can be done right from your dashboard.
On the menu on the left side of your screen, select Payroll. From here, you can choose whether to set up payroll for employees, contractors, or workers’ comp. For the purposes of this post, we’re going to click the Employees option.
From this point, you will need to select a QuickBooks Payroll subscription plan. You can select various features to get a plan recommendation from QuickBooks or you can choose your own. Plans are priced from $45 – $125/month plus $4 – $10/month per employee. You may be eligible for a 30-day free trial of any of the three plans. For this post, we are using the Core plan.
Step 2: Basic Information To Set Up Payroll
Next, you will need to answer a few basic questions about your business in order to set up your payroll. These questions include:
- Have you paid employees in 2020?
- When is your next payday?
- What is the primary work location?
Step 3: Add Employees
Now, it’s time to pull out all of that employee information so you can set up payroll and get them paid. After answering the questions about your business, you’ll be prompted to add employees. Note that you may have previously added employees for other purposes. While you won’t have to re-enter all information, it’s possible that you may have to add in additional information — more on this in the next step.
For now, we’re focusing on adding new employees that you haven’t previously entered into QuickBooks Online. Once you click the Add Employee option, you’ll need to start inputting data. This includes:
For each employee, you will need to provide a legal name, hire date, and email address. You will also have the option to allow each employee to access pay stubs and W-2s through QuickBooks Workforce.
How often is this employee paid? In this step, you’ll set up a pay schedule. Fortunately, you aren’t required to set up a different pay schedule for each employee, as there is an option that allows you to use the same pay schedule for every person you add. Of course, if pay schedules differ, you want to ensure that you input the correct one for each employee.
In this step, you’ll input how much each employee is paid. You can select hourly rate, salary, or commission only. If you have an hourly employee, you have the option to set default hours per day and days worked per week if the employee works the same amount of hours each week. This allows you to automatically run payroll without having to input hours every pay period. In this section, you can also add other types of pay, such as sick time, overpay, or vacation time.
This section is for adding any deductions for retirement plans, healthcare, wage garnishments, and loan repayments.
For this section, you need to have the employee’s W-4 handy. Simply transfer all information from the W-4 directly over to the form within QuickBooks to set up and calculate payroll taxes.
In this section, you can add the employee’s date of birth.
How do you want to pay your employees? In this section, you get to choose. There are several options available: direct deposit, direct deposit to two accounts, direct deposit with balance as a check, and paper check. If you opt to pay by direct deposit, you must have the employee’s account information available. If you do not have this information available, you can choose the paper check option, which allows you to print and distribute paychecks to your employees.
If you’re paying your employees through direct deposit, you must also fill out a direct deposit authorization form, signed and dated. A voided check should also be provided by each employee (although it isn’t required) to ensure that account information is accurate. These documents are kept for your own business records and do not need to be submitted to QuickBooks. A blank direct deposit authorization form can be viewed and printed through QuickBooks.
Once all information has been added for this employee, save your changes and continue to add each employee following each step outlined above.
Step 4: Add Workman’s Comp Policy Information
The next step is to add your workman’s comp policy to QuickBooks Online. If you’re already covered, QuickBooks makes it easy to add your policy information. If you don’t have a policy, you can opt to have QuickBooks help you find a policy, or you can choose to do so yourself at a later time.
Make sure that you fully understand the workman’s comp laws in your state and that you’re in compliance. If you don’t have a policy or you’re unsure of the laws in your area, consult with an attorney, insurance agent, or CPA to learn more.
Step 5: Set Up Payroll Taxes
Now, you will need to make sure that you have the correct information in QuickBooks for payroll taxes and forms. For this section, you will need to enter your filing name and filing address. You will also need to answer the following questions:
- Did you hire your first employee within the last 6 months?
- Did you buy your business from a previous owner?
- What is your company type?
- What is your Principal Officer Title?
- Is your business a non-profit?
You’ll also need:
- Federal EIN
- State Account Number
- State Withholding Number
If you don’t have these numbers handy or you’re a new business that doesn’t yet have these, you do have the option to skip this step for the time being. For tax purposes, however, you will need to come back at a later time and add this information.
Step 6: Connect Your Bank Account
If you are paying your employees through direct deposit, you will need to add your bank account information to QuickBooks. Adding your account info also allows you to send payments (whether you’re paying bills or paying contractors), as well as e-file and pay your taxes online.
During this point of setup, you’ll have to have some information on hand.
For this section, you will need to add or edit:
- Business Name
- Business Type
- Business Email
- Business Address
- Business Phone Number
The person associated with your business bank account will need to have their information added to QuickBooks. Required info includes:
- Owner Name
- Business Title
- Phone Number
- Social Security Number
Bank Account Information
For this step, you have the option of signing into your bank account. Simply select the bank that you use for your business account and input your login information. You also have the option to enter bank information manually, although this process may take several days before your account is connected.
Step 7: Sign Your Tax Forms
While this step isn’t required, it certainly doesn’t hurt to take a few extra minutes to sign tax forms. This way, you can be prepared come tax time.
If you get confused at any point in the process, QBO makes it easy to stay on track. Simply click Payroll in the side menu and go through the To-Do list in the Overview tab, or select the relevant tab to go back and add or change information. You can also take advantage of the in-software QB Assistant if you have additional questions or need assistance in getting payroll set up.
How To Do Payroll In QuickBooks Online In 6 Steps
Now that you have everything set up, it’s time to run payroll. The hard work is behind you, and the rest is relatively simple, particularly if you take advantage of the software’s automations. To run payroll in QuickBooks Online, follow each of these steps.
Step 1: Confirm Employee Information
Start running your payroll by clicking on the Payroll tab in the sidebar, then selecting the Employee tab along the top of the screen. This screen will show the name of each employee, their pay rates, pay method, and employee status. You can click each employee name to edit information as needed. You can also add more employees through this screen. Once you’ve confirmed the information on this screen, click the green “Run Payroll” button in the top right corner to begin running payroll.
Step 2: Salary, Hours & Memos
In this step, you’ll need to confirm additional information. Make sure that the pay rate for each employee is accurate. If you entered in daily hours and days worked per week during setup, you’ll notice that QuickBooks has already calculated the hours for you. If this isn’t accurate, you can easily make changes. You’ll also see total hours for each employee, as well as combined hours for all employees if you have hourly employees. You’ll also see the total pay for each employee, as well as the combined total for all employees for this pay period.
During this step, you can also add a memo if needed. You can also view and edit the pay period and pay date if necessary.
Step 3: Preview Payroll
Once you’ve confirmed that all information is accurate, select the Preview Payroll button at the bottom right of the screen. From here, you will get an overview of your payroll. This includes total payroll costs, broken down by net pay, employee costs, and employer costs. You’ll also see the total number of payments, types of payments, and a delivery date. Once you’ve run payroll more than once, you can also see a comparison of totals from the last time payroll was run.
Step 4: Submit Or Save Payroll
It’s that time — time to pay your employees! At this point, you do have the option to save your payroll for later. You may opt to do this if you’re missing information for an employee or need to make changes. But if you’ve confirmed that everything is good to go, it’s time to run payroll.
Simply click “Submit Payroll” to complete the process. If employees are being paid via direct deposit, funds will be deducted from your connected account and delivered directly to the bank accounts of your employees. If you’re paying via paper check, you can view and print each check before mailing or handing them to your employees. You can also print paycheck stubs and view and export employee and employer payroll reports. Once everything is done, click Finish Payroll and you’ll return to your QuickBooks dashboard.
Step 5: Correct Errors Or Reprint Checks
You thought you did everything right, but uh-oh! You realized after clicking “Submit” that you’ve made a mistake. No worries. You can view your paychecks and make corrections, void, or delete them. Go back into the Payroll tab and select Employees. Click on the employee’s name, and select the Paycheck List tab right under their name. Select the paycheck, then choose your action. Checks can be edited, voided, deleted, or reprinted.
Step 6: Automate The Process … Maybe
Pretty easy, right? But what if I told you that payroll processing could be even easier? The good news? QuickBooks allows you to automate payroll, so you don’t have to remember to go through the process each time payday is around the corner. The bad news? Not every business qualifies.
According to QuickBooks, Auto Payroll is available only to a select number of customers. In order to qualify, you must meet the following requirements:
- All employees must be salaried.
- Payroll setup must be complete.
- There are no holds on your account.
- Auto Payroll is not available for your first payroll.
Once you qualify, you can easily turn on Auto Payroll by selecting the gear icon, choosing Payroll Settings, and then toggling on the Auto Payroll switch.
QuickBooks will send a payroll summary to you a few days prior to payday so you can ensure that everything is accurate. If something is off, you can make changes through your QuickBooks account prior to the deadline set by QuickBooks. Otherwise, funds will be deducted from your account and paid to employees per your pay schedule. You can shut off Auto Payroll at any time through the Payroll Settings tab.
And that’s it! While this may seem like a lot to take in at first, the process is quite easy and not quite so time-consuming once everything has been set up. QuickBooks makes it very easy to set up and roll payroll by walking you through the process, and of course, providing in-software assistance when you need it.
Start Running Your QuickBooks Online Payroll With Confidence
Not only does QuickBooks Online provide a simple way to balance your books, but it also makes running payroll easy as 1-2-3. You can have your payroll set up in no time, making sure your employees are paid on time every pay period. You can also rest easy knowing that you’re compliant with payroll tax laws, even if you’re completely new to this whole small business thing. Remember to take your time, have your documents and information ready, and follow each step.
If you get tripped up in the process, don’t forget to take advantage of QuickBook Online’s resources to answer your questions and help you get your payroll set up correctly. Good luck!