How To Set Up QuickBooks Payroll
QuickBooks offers incredibly in-depth payroll features. This ensures proper payroll procedures and IRS tax compliance, but it also makes for a long setup process. But don’t worry. We’ll walk you through how to set up your QuickBooks payroll in 20 simple steps.
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How To Set Up Payroll
Before you begin setting up QuickBooks payroll, there are three things you must have:
- Enough Time
- The Proper Documents
- Your Payroll Service Key
First things first. Make sure you have adequate time to set up payroll properly. Here is a chart QuickBooks created to give you an estimate of how much time you need to set up your payroll:
You’ll also want to download QuickBooks’ Payroll Setup Checklist and gather the proper documentation. Tracking down all of the information and gathering the documents may take some time, but having everything you need in one spot saves you tons of time in the long run. (There is also a helpful Payroll Getting Started Guide if you want additional assistance.)
After you purchase QuickBooks Payroll, you should be given a payroll service key via email. If not, call QuickBooks to receive your service key so you can begin setting up QuickBooks Desktop Payroll.
Now, sit down with a good chunk of time, all of the documents you need, your service key, and a big cup of Joe. We’re ready to go!
Step 1: Enter You EIN
To begin, go make sure you’ve entered your EIN into QuickBooks. You most likely did this already when setting up your QuickBooks Desktop software, but just in case, go to Company>My Company and then click on the Customer Information tab to make sure your EIN is correctly entered into QuickBooks. Click “OK” when done.
(If you don’t have an EIN, you may want to consider getting a business EIN, but you can also enter an SSN if that’s how the IRS identifies your tax filings. If you aren’t sure which is better for your business, consult your accountant or a business advisor.)
Step 2: Add Payroll Service Key
Verify that your QB license number and EIN are popping up correctly. Then click “Add” in the bottom left-hand corner.
Step 3: Enter Service Key
Remember that service key we mentioned earlier? Enter that number now and click “Next.” Call QuickBooks payroll support if you are unsure of your service key.
Step 4: Confirm Your Payroll Subscription
Next, you’ll need to confirm that you are adding a payroll subscription to your computer. QuickBooks will ask: “Do you want to add your subscription to this machine?” Answer “Yes” to continue.
Step 5: Download QuickBooks Payroll
On this page, select the “Open Payroll Setup – I want to start right away” option if you want to start setting up payroll after downloading the software. Click “Finish” to download QuickBooks Desktop Payroll.
Step 6: Install QuickBooks Payroll
You should see a box like the one below pop up. This means that payroll has been successfully added and is now being installed. Wait while QuickBooks finishes installing payroll. This process usually only takes a few minutes.
Step 7: Restart QuickBooks
Once QuickBooks Payroll has been installed on your computer, this warning box will pop up. Click “OK” and restart QuickBooks so that you can be sure that your software has been updated correctly.
Step 8: Select Payroll Setup Method
Once you’ve restarted QuickBooks, go to Employee>Payroll Setup to properly configure your payroll. First, you’ll be asked if your employees have previously received paychecks from your business. If the answer is no, you’ll also have to determine whether employees need to be paid today.
For our sample company, we clicked “No.” A section popped up on the left with all the payroll setup sections we need to complete. If you’re an existing business who clicked “Yes,” your “First Paychecks” section will be replaced with a “Year-to-Date Payroll” section where you can add past paychecks and previous business history by following the payroll setup wizard.
Step 9: Select Company Setup Method
QuickBooks will now ask you if you want to use the “Typical new employer setup” or “Customer setup” method. For the typical new setup, “QuickBooks automatically provides all the pay types and benefits commonly needed by new employers,” while the custom setup adds the ability to customize your benefits. QuickBooks advises:
Choose Custom setup if you need to set up sick time, vacation time, or insurance benefits.
We are going to choose the “Typical new employer setup” method, but you can choose “Custom setup” and follow the setup wizard, or you can go back and add custom benefits at a later time. Select your setup method, and click “Continue.”
Step 10: Update Employee Information
If you haven’t added employees into QuickBooks, now is the time. Click “Add New…” in the bottom left-hand corner to get started.
If you have already added employees into QuickBooks, you’ll want to verify that all of their contact information and tax information is correct. On the screen below, you’ll see that QuickBooks puts a warning symbol next to employees with missing information and a red X next to employees that have an error in their information. To update or edit employee information, select the employee and click “Edit” at the bottom of the screen.
Step 11: Enter Employee’s Contact Information
Begin by entering their contact information, including their legal name, employee status, and address. Then click “Next.”
Step 12: Enter Employee’s Hiring Information
Add your employee’s hiring information, including their employee type, SSN, hire date, release date (if applicable), birth date, and gender. Then click “Next.”
Step 13: Enter Employee’s Wages
Enter information regarding your employee’s wages. Information will vary depending on whether your employee is salaried or paid hourly.
If you chose the “typical new user setup” process, QuickBooks will already have auto-populated wage types like “double-time,” “bonus,” and “commission.” Click on the items that apply to your employee and enter the wage amount. If you are using the “custom setup” option, here is where you can add benefits like “vacation” and “sick pay.” Click “Next” when everything looks correct.
Step 14: Sign Employee Up For Direct Deposit
If you want to pay your employee via direct deposit, you can set direct deposit up here or you can come back and do so at a later time. We’ll cover how to set up direct deposit in more detail later on in this post, so for now, we’re going to click “Next.”
Step 15: Enter Employee Tax Information
Select the state in which your employee is subject to taxes. If you are unsure of the proper tax settings at any time, click the blue “Explain” hyperlink for more information. Also, answer whether or not your employee has lived or worked in another state while employed by you. Then click “Next.”
Step 16: Enter Employee’s Federal Tax Information
Use your employee’s W-4 form to find and enter the following information: filing status, allowances, extra withholding, nonresident alien withholding, and HIRE Act Exemption. Also select whether or not your employee is subject to Medicare, social security, federal unemployment, and/or advance earned income credit.
Again, click the blue “Explain” hyperlink at any time for more information, or contact your tax advisor or a QuickBooks support representative for extra support. Click “Next” when done.
Step 17: Enter Employee’s State Tax Information
Next, enter similar information regarding your employee’s state tax information. If your employee is subject to any special local taxes (other than those listed above), you will be prompted to add additional information. Click “Next” when this page is completed.
When you click next, you’ll be taken to a page where you can enter any additional state tax information. Click “Next” when ready. Then click “Finish.”
Step 18: Review Employee List
Repeat steps 10-18 until all of your employees are successfully added into QuickBooks. Once you’re done, review your employee list and click “Continue.”
Step 19: Create Paychecks
Next, you have two choices: “create paychecks and finish tax setup later” or “continue to tax setup.”
The tax setup process varies depending on your business’s tax obligations and pay schedule. You can print and follow step by step tax instructions to complete this section. Or, you can come back later and add in your tax information. For now, we are going to move on and create paychecks.
Step 20: View Payroll Center
You have now officially set up payroll! (Mostly.) You may need to finish adding your tax information in the future, but for now, you can take pride knowing your payroll is up and running.
At this point, I highly recommend taking a look at the Payroll Center to see everything that QuickBooks Payroll is capable of.
For example, in addition to letting you run payroll, QuickBooks also helps with payroll taxes. If you go to your Payroll Center and click on the “Pay Liabilities” and “File Forms” tabs, you can see all of the tax features QuickBooks helps with.
As you can see in the pictures, the QuickBooks Payroll Liabilities center shows you how much you owe in payroll liabilities, how to manage liabilities, adjust liabilities, and make payments on payroll liabilities. The File Forms center shows you which forms to file and if they’re due quarterly or annually, how to order tax forms, e-file, and more.
If you have any questions about the payroll setup process or your payroll liabilities, contact QuickBooks payroll support or download the QuickBooks Payroll Getting Started Guide. Don’t forget to check out the rest of our QuickBooks Desktop Pro 101 Series to learn how to run payroll, use direct deposit, write and print payroll checks, and more.
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