While many small business owners are using online payroll services to automate their payroll, many prefer to do it themselves and manually enter payroll in Quickbooks.
The option to manually enter payroll in the QuickBooks accounting software was built into the software and was easy to access. Then came Quickbooks’ payroll service and, as one would guess, was hidden in the name of profits. While not as convenient as processing payroll automatically, when you enable manual payroll, Quickbooks will process in a very similar manner as is used when using their payroll service. The main exceptions are that you will have to calculate payroll taxes manually using payroll tax tables or formulas and payroll tax forms can’t be printed.
Learn the following steps to process payroll transactions manually in Quickbooks Desktop.
10 Steps To Enter Manual Payroll in QuickBooks
Step 1 – Click on “Help” in the top QuickBooks bar, then select QuickBooks Help
Step 2 – Enter “calculate payroll manually.”
Step 3 – Next, in the Company Preferences tab, you see a series of payroll topics. Click on “Calculating payroll taxes manually” (without a subscription to QuickBooks Payroll)
Step 4 – A new topic window pops up with a statement from Intuit trying to scare you into using the Quickbooks payroll subscription. The statement says that if you use manual payroll processing, Intuit assumes no liability for any improper calculations. Not to worry, as if you have been doing payroll manually, your liability hasn’t changed.
Step 5 – Towards the end, there will be a sentence saying, “Set your company file to use the manual payroll calculations setting.” Click on the words “manual payroll calculations.”
Step 6 – A new window appears asking whether you are sure you want to set your company file to use manual calculations. Many people do feel uneasy at this step and are really to just pressure you to use the Intuit Payroll Service.
Look for the text towards the bottom of the window and click “Set my company file to use manual calculations.”
Step 7 – You will see a message trying to convince you in continuing to use the Quickbooks payroll feature, stating that you must calculate and enter paycheck amounts manually. Select ok to continue, and the manual payroll processing is now active.
Step 8 – Go to the Edit option and select Preferences.
Step 9 – Find “Payroll & Employees” and click on “Company Preferences.”
At this stage, you will see that Payroll items are visible below the List Menu.
Step 10 – Now, you need to add tax rates such as state and federal withholding, Social Security, and Medicare.
Here the payroll schedule can be assigned to the correct employees, and QuickBooks calculates the due dates for each upcoming pay period. Fortunately, the payroll schedule only needs to be set up one time. It is recommended that tax payments for payroll taxes are scheduled, but the software makes entering payroll journal entries easy and keeps the flexibility to make an unscheduled payment if needed.
Please be sure to double-check all the calculations before proceeding with running the full payroll as incorrect calculations can become very expensive and time-consuming
Also, if you are using the QuickBooks Payroll Service Subscription, you must call the Intuit Payroll Service to cancel your subscription to avoid any future charges.
How to Record Outsourced Payroll In Quickbooks
While the Intuit Payroll Service is a great option, many find it confusing and/or too expensive and opt to use an outside payroll service like Gusto, Paychex, or Zenefits. These are great services as well; however, a few steps need to be taken to ensure the costs are entered into Quickbooks software correctly. Some will manually enter the gross payroll expense, while others will use net payroll as a journal entry to save time.
To record outsourced payroll, follow the above steps in the 10 steps to enter manual payroll in Quickbooks, to create the manual tracking accounts in the Chart of Accounts.
When recording outsourced payroll in Quickbooks, be sure all wages from the employee’s direct deposit are entered as a positive number and all payroll taxes (both the employee and employer’s share) and other payroll deductions / withholding amounts (401k, HSA, etc.) as a negative number, so they are deducted from the employee’s paycheck and entered into a liability account. The final totals from the payroll report should equal the sum of the employee’s wages. As an added check, you may want to double-check the amounts of the employee’s payroll check and the company bank account statements match your total amount.