payroll

Payroll Processing in QuickBooks Online (QBO)

General Aspects of Payroll

  • Monthly payroll responsibilities vary depending on the client.
  • Clients without payroll require no action in QBO regarding payroll.
  • Clients with payroll have multiple options:
    • They may choose to run payroll themselves.
    • In this case, clients enter payroll data for each cycle and generate necessary reports.
    • Alternatively, clients may request assistance with payroll processing, entrusting the bookkeeper to enter data, generate reports, and process payroll.

Third-Party Payroll Providers

  • Most businesses use third-party payroll providers for payroll management.
    • Examples include:
    • QBO Payroll
    • Gusto
    • Paychex
    • ADP
  • These providers handle:
    • Calculation of taxes and withholdings.
    • Direct deposits or issuance of paper checks to employees.
    • Filing payroll tax returns and remitting payroll taxes to government agencies.
  • If not utilizing a third-party provider, businesses remain responsible for paying and filing payroll taxes to federal and state agencies.

Local Payroll Providers

  • Some businesses may engage local payroll providers for calculations.
    • These providers inform business owners regarding check amounts and payroll tax payments.
    • Business owners may either remit taxes themselves or collaborate with the local provider.

Integration Between QBO and Payroll Providers

  • Online payroll platforms often sync with QBO.
    • This results in automatic journal entries in QBO, documenting:
    • Gross payroll wages expenses.
    • Employer payroll taxes.
    • Net wages.
    • Withholding amounts.
  • If there's no sync capability, bookkeepers must acquire payroll summaries or general ledger reports from payroll systems to manually enter journal data.

QuickBooks Online Payroll Integration

  • QBO offers an integrated payroll product with several subscription levels.
    • Subscriptions allow payment for employees and contractors.
    • There is no test environment for practicing QBO payroll features due to reporting responsibility.
  • Subscription Plans Include:
    • Payroll Core: Basic payroll processing, next-day direct deposit.
    • Payroll Premium: Includes additional HR support.
    • Payroll Elite: Comprehensive support with health benefits, 401(k), and 1099 filings.
Pricing Structure
  • Monthly fees with per-employee or contractor fees.
  • After the first twelve months of direct discounts, subscription fees increase (e.g., from $35 to $50).

QBO Payroll Certification Training

  • Recommended for any QBO payroll users.
  • Training provides essential information about using and navigating QBO payroll.
  • Resources available include:
    • Setup guides
    • Help articles
    • Google search options for various QBO payroll topics.

Manual Payroll Entry in QBO

  • For clients without an integrated payroll system, journal entries are necessary to record payroll transactions.
Journal Entry Essentials
  • Business payroll expenses consist of:
    • Gross wages.
    • Employer portion of payroll taxes (not deducted from employee gross earnings).
  • Example Payroll Report Components:
    • Gross wages: $6,000
    • Employee withholdings: $16.83
    • Net payment (direct deposit): $4,316.04
    • Employer payroll taxes: $6.46
Creating a Journal Entry: Step-by-Step
  1. Navigate to the journal entry screen in QBO.
  2. Enter the correct date (e.g., August 15).
  3. Create the following accounts if not already existing:
    • Parent Account: Payroll Expenses (Expense type, Detail type: Payroll)
    • Subaccount: Gross Wages (Expense type).
  4. Fill in journal entry details:
    • Debit Gross Wages: $6,000.
    • Debit Payroll Taxes (Employer portion): $6.46.
  5. Account for Withdrawals:
    • Credit Fidelity Checking for net wages of $4,316.04.
    • Credit Fidelity Checking for employer plus employee taxes: total including employee portion of taxes $16.83.
  6. Ensure debits and credits match for balance.
  7. Include a memo (e.g., “Payroll for 08/15”) and save the journal entry.
Copying Journal Entries
  • To record payroll for subsequent periods if consistent, copy the previous journal entry.
    • Modify the date and any relevant details to reflect new payroll periods (e.g., from August 15 to August 29).
  • Alter memos to reference the correct date.
Handling Non-remitted Taxes
  • If a payroll provider does not remit taxes, adjustments to journal entries are required:
    • Use liability accounts for unpaid wages and taxes instead of bank accounts.
    • Set up payroll tax liability accounts for pending remittance.

Conclusion

  • QBO payroll allows for efficient payroll management integrated with third-party platforms, or manual entries where necessary, ensuring accurate financial records and compliance with tax obligations.