 QuickBooks Online 2024. Payroll Settings and Account Mapping. Get ready and some coffee because we're doing some quick thinking with QuickBooks Online 2024. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our crunching numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunching numbers with us, will make you thin, fit and healthy or anything. However, it does seem like it worked for her, just saying. So, subscribe, hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we are in our Get Great Guitars 2024 QuickBooks Online sample company file. We set up in a prior presentation, opening up the major financial statement reports like we do every time. Reports on the left hand side, going into the favorites, right-clicking on the balance sheet to open the link in a new tab. Right-clicking the profit and loss to open a link in a new tab, right-clicking the trial balance to open the link in the new tab. If you don't have that trial balance in the favorites, you can find it by searching for it. Let's go to the tab to the right, close up the hamburger, change the range. We're going from 010124 to 013124 and then we will run for the refreshing. Tapping to the right, close up the hamburger and change the range again. 010124 tab, 013124 tab and then run it to refresh it and then we'll tab to the right one more time. Closing up that hamburger, change in the range, 010124 tab, 013124 tab. Let's run it to refresh it. Let's go back to the balance sheet tab as we discussed the project this time, which is payroll. We want to take a look at the payroll settings. We set up payroll in a prior presentation. We've discussed payroll, we ran the first payroll. Now we want to dive a little bit deeper into some of the settings of payroll. You will recall whenever we talk about payroll, I have to point out that you could run payroll internally within QuickBooks or you could run it externally with a payroll provider like an ADP or a Paychex. Either way, you will typically be paying or upsold on the payroll. You're going to have to pay for payroll basically, not just the employees and the government, but to process payroll through QuickBooks or with a third party provider or you could try to do it yourself. But I don't really recommend it because of the complexities with payroll and the liability involved and the fact that it's kind of tied to human resources and stuff like that as well. So you want to make sure that you're on top of payroll. Note that even if you think you're doing payroll role well, I mean I used to do payroll basically by hand at some accounting firms for some payrolls. And even when you think things are going fine, usually when you realize something is wrong, it doesn't happen until the end of the year when you're processing the W-2s, the 941s and the 940s and have all the other tax stuff that you're trying to do, which is the worst time to try to fix the payroll that you thought was running smoothly through the entire year. So I mean generally with payroll, you like to get it right the first time rather than use like a tinkering method. Tinkering is great when you're doing working with mechanics and stuff like that. You can see if it works, turn the light on, see if it turns on and then tinker with it. Payroll, not so much the best way to go, that would be more like trying to cut a door and you cut it too small and now the door is too small. You can't glue the wood back on it so that you have to measure twice, cut once. That's the adage. Okay, so we turned on the payroll in here so we can see the processing of the payroll and last time when we processed the payroll, we ended up having our liability accounts down here. This is what we withheld and our payroll taxes for the Fed and the state and then on the income statement, we have these two accounts for the payroll within the payroll expense, well we have a payroll expense account and then the taxes and the wages. Now, you might then think one thing you might come away with or want to change would be the accounts that are being used when you process the payroll. So you might say I would like the payroll to be going to other accounts. So once the account is set up, you could simply change the name of the account so if you don't like the term wages and you want to call it salaries or something or payroll or something like that, just simply payroll expense, then you can possibly change the name in simply the general ledger. However, you might have a situation where you want to break out different types of payroll, possibly saying that you want payroll for certain employees to be salaried payroll, payroll for other employees to be wages payroll indicating hourly, or you might set up your system so that you have payroll for the sales force going to a different account than the payroll for the admin for example. So with more complex mapping, we'll kind of touch on some of the settings that might help you there. On the balance sheet side of things, similar type of idea. Note by default, the system generally puts the information into the payroll liability for federal taxes, that includes the 941s to 943, 944, this basically the Social Security Medicare and federal income taxes, and then the federal unemployment tax, which is really a federal, it's another federal tax, but this is only on the employer side and you have to file a separate form for it. So it makes sense the way they broke this out, but you still maybe you want to break out whatever the Social Security, Medicare and the federal income tax into its own payroll account for whatever reason, or maybe you want to combine these all together into one account for whatever reason, that would be the mapping of it. So if I go to the tab to the left-hand side, and if we go into the sales on the left, that's where I typically find my, I'm sorry, that's not where I wanted to go, transactions on the left, we go into the chart of accounts, when we set up the payroll, that then provided us with some of our accounts. So let's take a look at some of the liability accounts down here. Here's our payroll accounts. So it just basically set up the payroll accounts as you would expect in our chart of accounts, you can adjust them just like you would in the other account editing the accounts. So if it's just a name change type of thing, you may be able to go in here and just change the name here, and then we have our expenses, which of course were created down in the expense area for the payroll. Here they are. I had to go to the next tab over, but there's the payroll tabs. So I'm going to open this up. Notice that we have our payroll information is down here in the, what I would call the employee center where we set up the payroll. We have the overall payroll. We've got our employees set up here now. We also have some more settings up in the cog. So if I go into the cog up top, we have then the payroll settings. So I just want to go through some of the payroll settings now within this section. And we have a more detailed course or section on payroll as well. So we're just going to kind of go over these in general. We're not going to dive into each of the settings in detail here. So general tax. So company type filing name and filing address. So we have the general tax information. This is the info used when you applied for your federal EIN number. Okay, so what is the EIN number? If you have employees, you have to have the EIN number that's filed with the IRS, because obviously every person in every business is just a number to the government. And so you have to have the EIN number to process the payroll. Now even if you don't have employees, you might still want an EIN number because as a contractor, you don't want to be giving other people your social security number. So it's usually pretty easy to get an EIN number online. You can file and go to the IRS website, irs.gov, irs.gov. And you can search for the EIN number. You might be able to just do it online. But they're going to need the address. And we said that we were a sole proprietor for the type of entity. So that is that. That's basically was already set up when we set up the company file. And then we've got the federal tax. If we go into the federal tax, you can find what you need in letters and tax notices you've received from the IRS. So the IRS will give you the EIN number. It usually looks like this. It's got the two numbers up front and then it's a nine digit number in total. You can edit this and change the EIN number. Obviously, the format looks different here than basically like a social security type of format for the number. So let's go ahead and save that. I'm not going to change it for the practice problem purposes here. And then you've got the California tax. So you can have settings for your state depending on the state that you're in, remembering that we're talking here about federal, about the United States. So in the United States, we have got the federal taxes and then we have the state taxes that are different. If you're in another country, then the taxes are going to be the thing that's going to be different from place to place because it's a law. So the double entry accounting system, much of the rest of the course will be the same because double entry accounting is like math. It's going to be universal. It's the taxes that usually have an impact on what's going to happen with the accounting. Any case, auto payroll. So it says automatically pay your employees. So here we have select employees and roll eligible employees. You want to pay automatically uncheck employees to remove them from auto payroll. Learn more about auto payroll, clicking save changes, let's into it run payments for enrolled employees. Each pay period will keep making payments unless you change the setting. Clearly auto pay would be great if you have a system where you pay employees salary. For example, in the payroll, it's just going to be running fairly smoothly and you have enough money in the bank, hopefully. So when they process the auto pay, that will go well. This would be a problem for us with Erica here because we don't know the hours possibly. If you have hourly employees, that might be a little bit more difficult to run. You still might be able to do it if you enter the hours into QuickBooks using the timesheet entry. But if you're manually, if you're doing tracking the hours somewhere else and then you need to enter the hours as you process the payroll, that might be a little bit more difficult. So you would think this would run most smoothly for like salaried employees where everything's going to be basically automatic and should be able to be run then automatically. And then we've got the tax and tax forms. Let's check that one out. Automate taxes and forms. So we'll automatically pay and file your federal and state payroll taxes including year-end filing, beginning with periods, ending on or after Monday. So that is great. And that's one of the huge benefits that you can have by having some type of payroll that you're paying for because if they're able to process the payroll forms, that is something that was quite tedious before to have to do basically by hand in essence. So that's going to be nice if you can get the 941s on a quarterly basis, the 940s and then helping you out with the W-2s and the W-3s. And that kind of stuff is becoming more electronic, which is great. Unfortunately, there is a downside to that which is that once things become easier, the IRS is going to want more information. Big Brother is going to be looking over your shoulder, watching everything you do, criticizing every step you make, and then taking a piece of whatever you stepped on. And if you found $100 on the ground, then he's going to reach over your shoulder and take it from you and then push you in the mud. Okay, maybe that's an exaggeration, but that's the idea. They're going to want more information. That's what I'm saying. Get out of my business. This is what I'm doing here. Third-party designee. So do you want to let an employee, a pay tax preparer, or someone else discuss your tax return with the IRS? So we'll add this info to federal forms 941, 944, 940, 943. This is going to be one of the questions that's on the form. So typically, if you had like a third-party person process the form, then you might want the IRS to be able to discuss the form with them. So in other words, the business owner oftentimes is working like we're a guitar shop. We do guitar stuff here. If we had an employee that's processing the payroll, then we might just want them to be able to discuss with the IRS what's going on with the payroll as opposed to simply just processing the forms because that's what they're paid to do, hopefully. Hopefully they're able to do that with some kind of ability, right? But we got the pay preparer. So do you use a pay preparer for Get Great Guitars federal taxes? We'll add this info to the federal form. So that's going to be another question whether we have a paid preparer or not. All right, we're going to close that up. And we've got the taxes and tax and forms, payroll and filing preference. All right, we got automate tax and forms. So we'll automatically pay and file your federal state payroll taxes including your end beginning. That's great. I think we did that already. Federal preferences, third party. We did that. Work location, manage all work locations. So now we have company address. So if we had different work locations, we can manage the different work locations if you had a larger place. So I'm going to go past that one. Employee notifications. Let's look at that. So send to the notifications, setup notifications. So we have the setup notifications, form filing notifications, payday notifications, tax notifications. Now, obviously these are all things that would possibly be part of the payroll which it used to be, what happened oftentimes on site, right? You'd give someone the actual payroll check or something like that. But now you have the notifications which will oftentimes be electronic which once again should be easier and something that we can basically automate. So payday reminders are currently on. Payday reminder type, send same day submission due. Send day before. So you can send the payday the same day of the day before. Tax setup reminders are set up. So that's good. We'll keep those. Employee profile management. So let employee edit their info in workforce. We'll send you email when they changes are made. So remember, this is another huge benefit that used to be kind of an issue. We had a whole HR department that people had to go to to make some of the changes that are pretty basic kind of changes. And so if we can allow them access to their own payroll to make their own changes, have their own place because it's all electronic, that's nice. Things like the legal name, birth date, gender, address, emergency contact, profile photo. This is all good because the problem here of course from our standpoint as the employee is that we don't want to have to deal with this stuff in the first place. I don't want to have to report all the details on who my employee is to the government. I actually feel bad doing that. I'm a rat. I have to do that. I have to dox my workers to the government. I might as well be tweeting them out on Twitter so that someone can go attack their home or something as an employer or something like that, which I feel like is kind of not a very nice thing to do. But that's how it is. We're kind of required to do that. And so it would be better than if they fill it out on their side than again us getting it wrong. We have some liability issues and whatnot that if we get it wrong, then of course the employee might get mad at us and sue us. And if we get it wrong the other way, the government might get mad at us and then basically take our money, right? So if we have the employee do it, then we're going to be in compliance with what we need to do and the employee hopefully is going to be the one responsible for the information. If the government gets mad about the information that was put in, we're just trying to do our job that you forced us to do as the middle person tax collector here, which I never signed up for. I just wanted someone to do some data input for crying out loud. And I thought, anyways, share data. So this allow employee to import W2 data into TurboTax. Now TurboTax is a tax software that is also owned by Intuit, the owner of QuickBooks. So that could help you with some automations between the data input and the W2s, the tax filing software and TurboTax. Now I haven't seen these tax connections between like the bookkeeping and a TurboTax to work perfectly. I mean, I feel like you can just enter the W2 into TurboTax pretty easily. But they're trying to keep on trying to automate the TurboTax and the tax software. And maybe it's doing better on the individual side. I haven't seen it where they've really integrated the business side of things to be able to do like a schedule C or a corporate tax return, just pulling the information directly from QuickBooks without having to change anything right into the tax software. I haven't seen that kind of integration work yet. And so I keep testing it from time to time. And if I see it like, because really working, I'll let you know. But in any case, that's what they're trying to do here. Include automated income and employment verification service provided by the work number from Equifax. Okay, bank accounts. So then we have connect your bank and send money with QuickBooks. So to use direct deposit to pay your workforce as well as e-file and e-pay for your taxes, you need to connect your bank account. So once again, they're trying to have them be the checking account, which might be useful if you're doing the QuickBooks to make it easier to automate the direct deposit. Otherwise, you're going to have to set up your other payment system, which I don't think would be too difficult because you can still connect your bank using the bank feeds and use electronic transfers and whatnot. But it might be a little bit easier if you had your checking account here. I still think the biggest benefit of using QuickBooks checking account would be giving more options on the invoices to basically automatically turn around and pay off your invoices when you're trying to collect on the accounts receivable. But there's that. You can check that out if you want to look into that more detail. Pre-checks and pay stubs. So paycheck, choose your default printing. Pay stub on plain paper. Pay checks on QuickBooks completed check paper. So are you printing the checks out of QuickBooks? If so, then you're going to need the actual physical checks to put in place. So this helps us make sure your payroll contact information. So these are the people that you're going to contact with the payroll. And then we have the contact information and then the accounting, including the mapping. We have the paycheck and payroll tax payments. We'll go on to there. So which QuickBooks checking account do you use to pay your employee paychecks and payroll tax payments? So now we talked about before with this mapping situation, meaning which accounts are impacted when you process payroll. We saw once the accounts are set up, you could go in there and edit the account names in the chart of accounts, but this is actually going to tell us which accounts are going to be mapped to. So we're going to take it out of the checking account. Now it might not always be the checking account because you might take it out of like a payroll account. You might set up a separate account so that you can put just enough money into it, each payroll, to then process the payroll instead of taking it out of the checking account. Why would you do that? Because payroll is a pain and you're most likely to get sued by like employees or have a problem with payroll than any other thing and any other vendor or the government might get mad at you or whatever and so you want it as clean as possible. So if you have your own payroll account, that could be something worth setting up. In any case, we've got the wages expense. So where do you track employee wages in your QuickBooks chart of accounts? So we have all my employees' wages are posted to one expense account. That's the default, that's the easiest thing to do, it's just in wages. But you could have each employee wages are posted to their own expense account. So if you select that, now we have our two employees and we can post them to their own account. That could be really nice if you want a more detailed income statement. For example, what if Adam was like an executive or something and then Erica was in the sales team or something like that. Then you might put Adams under payroll for admin versus Erica going to another account which is going to be payroll for the sales team. And then you have each employee's wages are posted to different types of accounts, salary contractors and so on. So now we have the breakout by the salary. These are the types of payments. So salary people, you might break out into a salary account, regular pay, hourly pay, or these are the account types, the payment formats, breaking out into different areas. So I'm going to keep it in one account. All of them in one account, that's the easy thing to do. Employee taxes. So employee taxes, where to track employee or taxes that you've paid expenses in QuickBooks. Now when we think about the taxes, the taxes are confusing to a lot of people because we have to deal with the employee taxes and our own taxes. Remember what the government is doing here. The whole point is that they want you to be the tax collector for the employees. So when we talk about payroll taxes, sometimes we get confused in whose taxes are we talking about because when I take the Social Security, Medicare and Federal Income tax, those are the employee's taxes. Although I'm required to take those taxes from them before they even get, we have to take it out of their pocket before it even gets in their pocket because the government makes us do that and we have to pay it to the government. Those are payroll taxes, but those are the employee's payroll taxes. We're just a tax collector. We're just a tool that's been used. But if you are the employee or taxes that are our taxes, which is the matching of the Social Security, the Medicare and the FUTA tax, for example, and there could be state taxes, those are taxes we have to pay over and above. Now it should be the case that they break them out and QuickBooks does that correctly by default, breaking out the employee or portion of the taxes. Half of the Social Security, our portion as employer, half of the Medicare, our portion and the FUTA, for example. So all employer taxes are posted to one or you can have employer taxes are posted to different expense accounts for different employees. So again, now you have this situation that we have to pay our taxes and it should be broken out into a separate account, but if I now have admin employees and sales employees, for example, I should have an admin payroll taxes and a sales payroll taxes, for example. Note this is also kind of important as well because if at the end of the year when you process your 941s, your 940 and your W-2s and your W-3s, the numbers that should be like on the W-3, for example, adding up all of the wages should tie out to the expense, you should be able to tie those out and reconcile them to what you're recording on your income statement. And so if you can't do that, that's when I say why you catch the problem if there is a problem in payroll at the end of the year because you start to realize, wait a second, my W-3 doesn't match what's been recorded on the financial statements. That's a problem because you're sending both of those documents to the government and if those things don't reconcile, then the government, they can basically just with a computer, you don't even have to audit it, they might be able to just say, hey, this doesn't match, which you recorded here as wages doesn't match anywhere near what's on the W-2 versus what's on the income statement, right? So that's why we want to, at the end of the year, we want to be able to make sure we reconcile all this stuff so that it all ties out when we give it all to the government who could easily kind of just check those things. So employer taxes are posted to different expense accounts for different groups of taxes. So we have this one for the different groups, federal taxes, unemployment tax and the SUI and whatnot. So those are the types of employer taxes, federal taxes being 941 taxes or 943 or 944, social security Medicare taxes for the employer side, not federal income tax because we're talking about federal income tax for the employee and then FUTA is the federal unemployment tax for the federal only, which I know is a funny abbreviation to some people. Employer taxes are posted to different expense accounts. All right, let's close this one out. And then we have the tax liability accounts. These are the liabilities, the withholdings. So where do you track employer taxes that you owe liabilities in your QuickBooks chart of accounts? So you got the tax liabilities are posted to different accounts for different tax groups. So the 941, the 943, that's where we report the social security, Medicare and federal unemployment, federal income tax for the employees and we're putting them all into one liability account. That's what they make by default. So that's nice. And then the federal unemployment tax, that's the FUTA tax and that's the one that is just the federal side for state taxes. Now we could go to this one and say tax liabilities are posted to different accounts for different tax items. So you might want to, for whatever reason, break out the federal income tax, not mush it all together like mushing together your peas and your mashed potatoes when you're trying to eat, but you might want to separate them because they weren't separated enough. You need ridges in the plate to separate them. So then you break out the social security into its own separate account possibly and then the social security for the employer portion, the Medicare and then the Medicare for the employer portion. That could actually be kind of useful. You don't have to do that. I think it's too detailed. I think the default is fine. But when you're trying to reconcile your taxes at the end of the year, it might be useful to try to tie into the employer taxes versus the employee side of the taxes when you're looking into that stuff and you can get a little bit more detailed. So the food to tax and whatnot. So that's a more detailed one. But we'll keep the default. And then we've got the class tracking. Now class tracking is a, how do you want to track classes for payroll transactions? Class tracking is a way to break out usually the income statement into different columns by class. And it's a great tool for certain things. So if you want to break out by different departments, for example, then you might assign classes and you can assign the payroll to classes, which is great. So if you don't use class tracking, I use the same class for all. I use different classes. So if you want to have different classes because Adam maybe is in one department and Erica is in another department. It'll have the same income statement, but then two columns, two columns breaking out one and the other. So we have a whole another section or course on class tracking. If you want to look at that in more detail, class tracking, great tool, but confusing because we have other tools that are similar to it, but different. So it's confusing on which one to use and there's a bunch of different types of applications for class tracking. So it's like, well, what am I going to use it for? A lot of different things you can use it for. So update transactions, update account preferences for past transactions. According. So if we wanted to update, if we made these changes like the mapping differences, do we want it to update prior transactions or from this point going forward? So I'm going to say those are the settings done. I don't think we changed anything. I hope I didn't mean to change anything. We just wanted to take a look at those settings, noting that in general for payroll, these are basically the default payroll settings where we have payroll liabilities broken out thusly and then on the income statement, we have the payroll for the wages and the taxes broken out, but if you want to change the account names of these defaults, you can do that with just a chart of accounts, but if you want to map them to different accounts, then you can go into those, the settings. We just took a look at no changes. Trial balance is remains the same. We're still standing in the same place. This is where we stand. These are our two legs, the debit and the credit leg, and they haven't moved. It's like a rock, like an oak tree. We're just planted into the ground through this lecture.