 QuickBooks Desktop 2023 Pay Employees Let's do it within 2-its QuickBooks Desktop 2023. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop get great guitars practice file we started up in a prior presentation going through the set of process we do every time maximize the homepage view drop down hide icon bar open windows list checked off open windows open on the left hand side reports drop down company and financial P&L profit loss change in the range in 010123 123123 tab customizing it with the fonts the numbers to change it on up to 14 let's say okay yes okay reports drop down once again to the company to the financial to the balance sheet to the customized to the changing of the range in 010123 to 123123 and then change the fonts font size to 12 or 14 let's say okay yes okay I know I'm going fast here because we do this every time I'm going to open up one more report that's going to be the trial balance this time reports drop down trustee TB trial balance in the account and taxes area let's customize it with the range into the change in 0101232 that's to 123123 and font it number it let's bring this one even higher up a notch to 16 boom k yes k and there we have it that's the set of process we do every time we're not going to be thinking about the payroll which we set up in a prior presentation just a quick recap on how to set up the payroll process we went to the edit drop down we went to preferences we went into the payroll item the payroll here company and preferences we turned on the manual payroll not something you would typically want to do in practice when you're running live because you want the added check of of the math checking capabilities and the support typically of at least turning on payroll within quickbooks or and you might want to think about a third party payroll so the question when you're running payroll is do you want to be running payroll within quickbooks if you do you typically want to pay for it there's multiple payroll options that you can go through at that point or do you want to be working with a third party payroll provider who can then process the payroll possibly help with some of the human resources capabilities or necessities and then you're just going to enter the data into the system to make your financial statement and reporting correct we'll talk about that a little bit more as we go this is important if you're a bookkeeper as well because you might want to come up with a systemized system meaning you run payroll within quickbooks for companies if they need it or maybe you work with a payroll provider as part of your normal system to do bookkeeping your bookkeeping process the manual payroll however is great for practicing because it allows you to kind of actually enter the the payroll as we go in the taxes which can actually help us to understand them better if i go to the home page we can see that we have the payroll cycle down below we have the enter time entering the time is optional because that's something that you would have if you have hourly employees but you might get the time from other sources such as them just you know put in another software together or making an excel worksheet oftentimes the entering of the time is quite important when you're in a job cost system and you're going to create an invoice from it so that's when we'll use the enter time we will see it in future presentations as we create invoices from it now we're just going to enter the payroll notice that this line item down here will not be here unless you have payroll turned on in some way shape or form the pay employee button here is the button we would use to process the payroll we're going to process the payroll whenever we have set up our payroll processing system which can vary from company to company typical payroll periods being weekly by weekly semi monthly and monthly so we set ours up for monthly we're imagining it's now at the end of the month we're processing the payroll so let's click on this item and there we have it so we got them pay period ends we're going to say 013123 because we pay people monthly so the end of the pay period is going to be the end of the month of january in our practice problem we're going to say the check date is the same day 013123 that doesn't necessarily need to be the case because you might say hey look this is when the pay period ends but i don't pay people until like three days after that or something like that that means the check date will be after the pay period date which is often required or necessary in the event for example that you're collecting people's time sheets and whatnot and you have to set that up so remember that these two things are not necessarily the same and then we got the bank account we're going to be taking it out of our checking account note again a lot of times uh businesses might set up a separate payroll account just to process payroll you might say well how does it get money to process the payroll in the checking account we would transfer just enough money into the checking account to pay the payroll and then process payroll it's an added step why would we do an added step because by doing that all the payroll transactions which are quite complex payroll being the most common area for us to be sued in are in one account so i can i could see all those accounts all those payroll items with all the other junk in the payroll account so you could consider setting up a payroll account in and of itself for that reason we can print paychecks on check stock if we're going to actually be printing the paychecks putting the checks into the printer to print them out or we can hand write and assign the check numbers i'm going to assign the check numbers here and then we've got our two employees i could check all of them off or check them off individually i will check all of them off now if you had the payroll system set up properly hopefully everything will populate manually already or not manually it'll populate automatically but because we have manual payroll we're going to have to go in here and adjust it even if you had payroll on if you didn't have the hours entered into the timesheet you'd still have to go in here and enter the hours you know for the employees and so on right here this one's a salaried employee here's the hourly but i'm going to go into adam smith and enter the data for them manually into the system this is the this is the added kind of thing you got to do if you have the manual payroll so the salary is 50 uh 45 000 if i pull up the trustee calculator here i believe we said that adam was going to earn a salary of i think we said 55 000 a year divided by 12 months and that's where we get if i can calculate it four five eight three so that's where that number comes from and then down here we've got the salary and now we're going to figure the withholdings for it so federal income tax withholdings i'm just going to make this number up because this is the most complex one it comes from the w four so the w four information is going to take that information which is going to include things like marital status the number of exemptions any added withholdings that he told us to take out and we're going to have to take that out of his paycheck based on that information it's quite useful to have payroll turned on so that quickbooks can you know help us to to do that that particular calculation the federal withholdings represent federal income tax not for us the own the business the get great guitars business but for the employee we're withholding their federal income tax and if we take out too much they should get some of it back in a refund when they filed their form 1040 so it's it's not a flat tax it's not an easy thing to calculate because of the progressive tax system and the complexity in the tax code but you can do it manually with the use of tax tables you can find in the circular e and so on the irs website but i won't go into that in detail now we're just going to say it's 720 which is basically a made up number for the practice problem now the social security is another federal income tax which is usually more straightforward because it is more of a flat tax not exactly a flat tax but a little bit more of one so we could have 4583.33 times 0.062 that's typically what it would be so we're going to say that one is going to be 284.17 and then the medicare usually is more of a flat tax easier to calculate of 4583.33 times 0.0145 so that's usually about it should be 66 but our practice problem is a little bit a little bit off so we're going to use the same practice problem number which is 6.46 so that one again it's not exactly what it should be for for the medicare but we're going to match that out so it ties out to our worksheet that we're putting together when we do the bank reconciliation and everything and then down here we've got the matching which would be the 284.14 that's what we're going to pay on the employer side for taxes these are the actual payroll taxes for the employer whereas these are the withholding taxes so and then we've got the matching of the 6.46 here which would normally be 66 and then we've got the federal income tax which i'm going to keep blank now just a quick recap on this this is just the federal income taxes if we had state taxes we would also have to deal with the state tax side of things as well so keep that in mind and then we also have might have other withholdings which are going to be the voluntary withholdings the benefits things like health care plans 401k plans and so on and so forth we have a whole another course and whatnot that you can dive into in more detail on how to set some of that stuff up we're just looking at the federal income taxes and getting the idea or the gist of what is going on with the payroll and this practice problem so this is what has been earned this is what's being taken away from them these are payroll taxes but they're not our payroll taxes they're the taxes that the employee is going to pay we're the ones that are forcing them to pay we're the tax collector that's actually making them pay their taxes so that's why the net check this is how much they're actually going to get net these over here represent payroll taxes to us meaning we're paying taxes not on our income but on the employee's income we're paying taxes on an expense to us in other words that's what the payroll taxes will be now i'm just going to do a quick journal entry so we can see this basically in excel because i think it's quite important or useful to kind of see how this might map out i'm going to do this with debits and credits but uh if you if you just think about it as increases and decreases that can be useful as well and i think this is useful because a lot of people don't understand you know the payroll and if you can get a grasp on it then i think you have a good advantage so what's going to happen we're going to have we're going to have what's going to be impacted we're going to have payroll expense it's going to be impacted for the full amount which was 4583.33 what they're going to actually earn and then we had withholdings withholdings and we could call that payroll liability and this is going to be for what we withheld from their check and that's going to equal the 720 minus the 284 and put in negative because it's a credit minus the 6.46 that's what we took out of their check for withholdings and so and then we've got the the net check which is going to come out of the checking checking account which should be the negative sum a decrease to the checking account of the net check of the 3572 so that's kind of the journal entry that we can think of here we're also going to have our side of the payroll taxes that we have to pay for and that's going to be payroll taxes which is going to be the two let's say plus I'm going to say 284.17 plus the 6.46 social security and Medicare that we match and that's going to be an expense and then we've got once again payroll liability or something like that that's basically in essence the journal entry that we would expect we could break out this journal entry into multiple payroll liability accounts for social security Medicare and and federal income tax payments or we can group them in essence together all right so let's go ahead and and record that so I'm going to say let's say let's say save and close I'm going to do the same thing for Erica now so let's go into Erica now we've got her pay at 16 I'm actually going to bring it down to 15 to match our practice problem numbers that we have here so I'm going to bring that down to 16 to 15 and we might want to change that in her her employee information but I'm going to just change it here for now and then we're going to say the federal income tax with held which would come from the W for information and QuickBooks helping us to calculate it or from the circular e we're going to make up a number 360 for it and then the more of a flat tax calculation of the social security would normally be like 2400 times 0.014 times 0.062 normally be 14880 so that's what we'll use 148.8 and then the Medicare would normally be like 2400 times 0.0145 3480 so that's what we'll use 34.8 and then the net check oh hold on I hit enter I'm not done yet the net check is 1856 and then we'll match the social security of 148.8 the Medicare of 34.8 and then the the federal unemployment we're not going to look into that now that's a smaller tax for the federal unemployment so I'm going to use that those numbers once again we might have state taxes we would have to deal with depending on where we are at and so on and so forth we just want to get the general idea for our practice problem notice I could do the same journal entry for Erica here we can also think of this as if they were just one person and run the payroll as a total and have our one journal entry representing all of our employees in this case both of our two employees notice if we had a third party processing the payroll and then we were going to enter the payroll into our system for our financial reporting purposes we could then enter it as one large journal entry as if all our employees were like one employee and we wouldn't have to deal with all the detail because the detail would be necessary for the human resources and reporting purposes and and that kind of stuff that which would be done by the third party preparer although we would still have to think about how to reconcile our accounts and whatnot so that's just something to consider so we're going to go ahead and run this now let's go ahead and continue and run this and so I'm going to create the paychecks let's do that so it made two paychecks we can print the paychecks and print the the stubs so I'm going to say okay that looks good now notice that even if we don't even if it's like an electronic transfer that we give to the employees we still have to to give the paystubs to the to the employees as part of our human resources so if I go into a pay stub for example it's got the salary for the current period as well as the year to date it's got the withholdings that we're taking and the net pay obviously they know what the net pay is that's what's going to hit their account but we have to tell them why their net pay doesn't equal the gross pay we've got to give them that information from a human resources perspective closing this out closing this out closing this out we can then go into our register I could go to the lists chart of account double click on the register and we can see the checks that have been created for Adam and Erica here we could also then go into our balance sheet let's see the accounts that will be impacted now check the checking account if I double click on the checking account we've got the net check that are is impacted here for the two checks so we saw that and we can we can kind of see that here there's the net check in our journal entry format so if I double click on that it'll take me to a check form but the bottom of it will look different because it's a special check we use the paycheck widget in essence if I go to the paycheck detail here's the detail in it so there's the net check closing this back out closing this back out and closing this back out the other side goes into the profit and loss where we have the payroll expense account so if I double click on the payroll expense account there we have the two items for the expense now the main thing we think about going into the expense account is the gross pay so if I was to go into a check for let's do Adam's check again that four five or whatever was the gross pay not the net check closing that out closing that out the difference between the gross pay and the net check is the withholdings that we took from them that we don't get to keep we're going to be paying those to the government so that would be back on the balance sheet as a liability so now we're the tax collector in a similar way as we saw with the sales tax but now we've got the payroll liabilities that we took as the tax collector and if I double click on on Adam's stuff we've got the taxes that we took which include the different format of federal income taxes that we took here and it's part of our journal entry up top for the payroll liability so closing this out closing this out so we've got the 720 these are the two items that represent I believe social security here's the two items that represent the the our portion of the payroll taxes so the next item would be our portion of the payroll taxes that's the second journal entry this is what we had to pay over and above these are payroll taxes that aren't taken out of the employee's checks that we the employer get great guitars the business had to pay on the expenses of the employee so that's where you have this second item that's represented for the matching in essence it's set up to kind of resemble a 401k plan or something we matched here here here and here so then so this liability is made up of the withholdings we took from the employee social security medicare federal income taxes and then our taxes which we had to match which was social security and medicare there would be federal unemployment tax as well but that's fairly small we're not going to get into that and then it doesn't include we don't we don't have to match the federal income tax because that's not a payroll tax and then if we go to the profit and loss the other side note we grouped in the same account in payroll expenses so this payroll expense also includes the payroll taxes that we had to pay so this number right here represents adams gross pay including the payroll taxes that he paid because we're just going to pay it to the government on their behalf and then these two items represent our portion of the payroll taxes that we include these two items we could break out and we could use the items or just the items to do so to break out into another account called payroll tax expense and the payroll tax expense should only include the payroll taxes that we had to pay and so we could adjust the items that we have set up to do that if we so choose making a couple accounts here payroll expense payroll taxes we could also break out the liability to the different components if we so choose instead of having one liability account such as social security medicare federal income tax and if there were other withholdings california taxes for example and voluntary withholdings health benefit programs 401k plan and we might look at that a little bit in the future you can you can go to the lists up top and look at your payroll items and then if you went through some of some of your your payroll items then you can assign which you know which account it's going to be hitting when we set up basically the payroll items and you also could have for example on your profit and loss you might want to break out your expenses by types of employees hourly employees salaried employees and by location or something like that you might want to break out your expenses again you can use your items to help you to break that out in the more complex structures we won't get into that in too much detail but just keep in mind you do typically have the capacity to do that you'd have to be changing your items which are the underlying tools to be to be assigning the accounts when you're processing something in a similar fashion as the inventory and service items or the underlying tools driving the invoices and where they're going to be impacting in which counts accounts they will affect on the financial statements balance sheet and income statement also note that you've got a bunch of other reports as well for the payroll so we got the payroll employee reports you've got the summary report let's look at the payroll summary now from 010123 to let's say 013123 and then here is our summary report i'll customize it with the fonts and numbers bring it up let's say to 12 okay yes and okay so this is a report that gives us our summary data just noting that you can see this this looks kind of like a paycheck stuff right we got the way this particular report is broken out you got the gross pay and then the withholdings there's the net pay same for Erica but you can also think of it in total so if you got a report like this from a third party provider of payroll that you were doing and you were not doing all the detail in QuickBooks you might say is there a way i can just take the total enter it into the system with a journal entry because i don't need the detail in there i just want to make my financial statements correct and rely on the third party provider in order to give all the added detail breaking it out by by by the pay period and by the year to date information for human resources purposes and we just do what we need to do to get the financial statements correct however i'll realize that you also need to be entering it so that you have the reconciliation capacity with your checking account because these are going to come out of your checking account and you're going to have to reconcile with that as you would with it with any checking account for those amounts coming out okay let's just take a quick look at the trial balance and check our numbers so this looks good if anything is off here then i change the date range and see if it's a date issue now if there's a problem with a payroll check oftentimes what you want to do is is not try to change the payroll check itself in other words if you have an issue here a lot of times you don't want to go in here and see oh well just change the withholding because it was wrong because it's already been processed so you have to actually delete the check avoid it and then issue run the payroll again to fix a payroll check so payroll one of those things you'd like to get right the first time measure twice cut once as opposed to tinkering with it tinkering is a good way to do a lot of stuff but there's some things where it's advantageous to try to get it right the first time and payroll is typically one of those things