 QuickBooks Online, Employee Section Payroll Process. Get ready to start moving on up with QuickBooks Online. We're gonna be using the free QuickBooks Online test drives searching in our online search engine for QuickBooks Online Test Drive, selecting the option that has Intuit.com in the URL, Intuit being the owner of QuickBooks picking the United States version of the software, verifying that we're not a robot. Zooming in by holding down control up on the scroll wheel. We're currently at 1 to 5% on the zoom and selecting the cog dropdown. We're in the accountant view as opposed to the business view. We possibly will be toggling back and forth between the two views to see where things are located within them. Gonna be right clicking on the tab up top. We have some other tabs open, but we're just gonna right click on the QuickBooks tab here to duplicate it as we do every time to open our reports in them. Right clicking on the duplicate a tab to duplicate again, back to the tab in the middle as the tab to the right is thinking reports on the left hand side balance sheet. And then I'm gonna go to the tab to the right as that's thinking, even though it's done thinking and reports on the left. This time the profit and loss. Let's close the hamburger, hamburger and do the range change from 01, 01, 22 to 12, 31, 22. And then run it if you wanna refresh it, which we do tab to the left, closing the hamburger. And once again the rangeings, they are changing 01, 01, 22 to 12, 31, 22. That's the one run it. That's the setup process we do every time. 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. We're gonna go back to the first tab and let's select the plus button. In prior presentations, we've been focusing in on these cycles, customer cycle or sale cycle, vendor cycle or expense cycle. And now we're gonna be looking at the employee cycle. Noting that the employee cycle is kind of similar to a vendor cycle in that at the end of the day we expect money to be going out for the goods and services in this case services that we are purchasing basically the payroll. But payroll becomes much more complex than simply paying a vendor due to the fact that we have to deal with taxes and other kind of regulations related to it. Therefore it's basically got its own cycle and its own kind of specialization within it. Now I'm gonna jump on over to the Intuit website just to note that the payroll is typically gonna be an add-on feature, one that you would typically have to pay more for. So if I scroll down to the pricing options for example if you were to purchase one of the options and we've gone over some of these options in prior presentations, we will start another or a new company file in the second half of the course and take a look at them again. But this second item you've got the add payroll. So it's kind of like an add-on type of item. If you scroll all the way to the bottom of the webpage then you can search for the payroll under the products and this bottom component is typically been there for some time even as their website has changed. And if we can go into the payroll here then you can look at the pricing options up top which can give you some idea of some package items on the pricing. Obviously if you were gonna make a purchase you can call customer service and whatnot with regards to payroll as well. Notice you have the toggle thing up top to have a free component of some of these options. In the second half of the course when we start a new company file hopefully we can get a free 30 day trial of the company file as well as the payroll so that we can practice a little bit with the payroll but note that payroll is complex to the point at this time that it requires basically its own focus if you really wanna dive into it. We actually have some payroll courses and payroll courses within QuickBooks if you wanna dive into the details of it in more detail. But I also just wanna remind people that payroll might not be the QuickBooks or purchasing payroll within QuickBooks might not be the best option for everybody and it's not the only option either. So what you wanna do is get some advice in terms of how you should be dealing with payroll. Do you have payroll? If yes, how should you deal with it? If no, do you expect possibly having payroll in the future and what could you do to make that process or set up that process as easy as you can? The other thing to consider and understand is that if you're thinking about hiring contractors or do you have to hire them as an employee and it will be dependent upon the type of industry that you're in and the kind of person that you're contracting or hiring as an employee to see whether or not it would be best to hire them as a contractor or an employee. So those are some other things to kind of factor into your decision-making process when thinking about payroll. Now, if you've set up your QuickBooks file and you then want to buy payroll at some later time, you can't typically do that. You can kind of put it on an add-on type of item. And so the payroll tab over here, you kind of call it like the payroll center is on the left-hand side. You have your option here, need to pay your employees, run payroll quickly and accurately, file and pay taxes or let experts do it for you. So there's different options or levels of payroll that you can get and you can contact QuickBooks about that and turn on or then pick the option that would be best for you. But remember, the first place you want to go to get advice about payroll probably is not QuickBooks themselves or a payroll company themselves, but rather say your accountant or CPA and you would like to possibly pay for advice about what the best payroll option would be without talking to someone that you're actually thinking about paying to process payroll so that you can get advice that is neutral. You're not trying to hire them, you're just paying them for their advice and then determine if you want to contact QuickBooks if that's the way you want to go or possibly go to a third party like an ADP or a paychecks. So those are your primary options. You can run payroll within QuickBooks. You typically, you're gonna have to pay for that and then you gotta think about the level of payroll that you want to be paying for within QuickBooks or you can go to a third party. The biggest third party companies are like an ADP. So here's an ADP and this is paychecks. Now remember that payroll has become somewhat complex in the United States due to the laws related to it. So if you hired someone like a paychecks or an ADP, they would be processing the payroll outside of QuickBooks and processing the checks but the check processing is the easiest kind of component of the payroll process. The difficult part is reporting everything, making sure you're in alignments with the tax withholdings and then doing the tax preparations the 940s to 941s. And so if you outsource that to a third party, then what you can do internally is just make sure that you enter the data so that you can process your financial statements properly and they can take care of hopefully the payroll and some of the human resources. So if you're working on your own company file then the question is a major question. Do you want to outsource the payroll to a third party or do you want to do it within QuickBooks? You're gonna have to pay more either way. If you do it within QuickBooks, you will be processing payroll and you will get support from it through the software and possibly different tiers and levels of support depending on how much you're gonna pay for that support. If you do it externally, then the ADP or paychecks or whoever's processing the payroll should basically do most, all of the reporting requirements but you're still gonna have to add the information into QuickBooks just to get your financial statements properly recorded. If you're a bookkeeper, you wanna think about what's the best system to be recommending to potential clients. For example, if you're specializing in payroll, then maybe you wanna be turning on payroll and doing it internally or maybe you have a system where you're recommending a third party payroll company and possibly a CPA firm to help with taxes and you do the bookkeeping, you outsource to the payroll company and then you also get support for tax preparation at the end of the year with like a CPA. If you have a good network, then you can look for clients that would fit well in your network, whatever process you have set up. Okay, knowing that, let's just take a look at the payroll cycle. I'm gonna go to the flow chart over here. This is the desktop flow chart but I'm just gonna get an idea of the cycle of payroll just as we did with the other cycles. Now remember, payroll is basically the same thing as a vendor cycle. I mean, if there were no taxes or withholdings or HR stuff, then payroll would just be human resources. That is, payroll would just be another vendor. We would just say, okay, you worked for me. I would pay you just like a contractor. I would write a check at the end of the thing or give you an electronic transfer and it would just record payroll expense and the other side would go to a decrease. So the checking it out, we're done. We shook hands. I paid you what I promised to pay you, we're done. But it's not that easy because of all the laws and whatnot related to the payroll, which includes not least of which the withholdings, at least from a just journal entry standpoint and the complexities. So what makes payroll more complex? Well, on the federal tax side of things, we have to withhold taxes for the employees and pay them on the employee's behalf. That includes federal income tax, social security and Medicare. And then we have to pay taxes on top of that as well. That's our matching for social security and Medicare. We have some taxes that are on our side that are not on the employee's side, such as federal unemployment tax, FUTA, and we could have state taxes, which will change depending on what state we're in and if we have a company that's large enough and employs people in multiple states and then we might have different laws related to different states. QuickBooks is quite good and getting better and better at customizing its setup per state. So I can kind of automate that once I set up the system, which is nice. We also have some human resources kind of components, meaning all that kind of stuff on the withholdings has an account, it has a journal entry component that's kind of technical and difficult, but we also have reporting requirements. So for example, I have to tell my employees what their gross pay was and what their net pay it is. I can't just write them a check. I gotta tell them with a pay stub in some way, email to them if it's an electronic transfer or something like that and give them availability so they can see what they earned and what we took from them for the gross pay to the net pay. And so, and I have to do that on a pay by pay period as well as on a year to date summary. So that's gonna be a requirement. We also have, of course, the reporting requirements of the W-2s that we're gonna have to give to them as well. And there could be other kind of human resources requirements, sick pay and paid leave and that kind of stuff could be different from state to state that may not have as technical a journal entry component but a human resources component. So human resources and payroll can be tied together and an ADP, for example, sometimes is good at handling some of those broader issues to make sure you're in compliance with laws outside of just like the withholding laws. We also have benefits that are often tied to employees such as if you wanna set up a 401k plan or a SEP or something like that, a simple IRA or something and then health insurance often goes through and those could be voluntary withholdings which can have the same kind of complications. So that's why the payroll gets quite complex and detailed in the system. So just entering payroll, typically you can enter the time if you have hourly employees. Well, first we'd set up the payroll, make sure that you have it set up properly for the locations that you're in and then we would be entering possibly time if you're entering time but you don't have to enter the time because this time entry is often used to say bill people in a job cost system but it can be used also to count the hours to enter the number of hours in order to process the payroll. The main thing we do when we process payroll is the form. You might think of it as a form which is gonna generate multiple checks. So clearly when we issue the payroll checks it's similar to a check type form or an expense form if it's an electronic transfer that decreases the checking account but like some of these other checks that we saw like a special check, like a bill pay check it's gonna have its own little widget and its own little indication that it's a special payroll check. And then we process the payroll whenever we choose to process payroll as a business typically weekly, bi-weekly, semi-monthly or monthly. So we have to process during those time frames and then sometime after we process the payroll when we process the payroll we're gonna generate multiple checks to our employees, however many employees which are gonna decrease the checking account by the net pay, but they earned the gross pay. So the difference between gross and net are gonna be the withholdings, social security, Medicare, federal income tax, any kind of benefits, any kind of state withholdings that we're gonna record as a payable that we have to then, that we in theory took from the employees or kept or withheld from them in other words and our side of taxes of federal unemployment tax and our share social security, Medicare and we're then gonna have to pay that sometime pretty much like right after we process the payroll or some point after we process the payroll to pay the withholdings to the government and to the benefits and so on and so forth. So that's the general process that we're gonna do on payroll that's the normal cycle. And then within that cycle we're also gonna have reporting requirements to the Fed and possibly to the state. Those are gonna be a form 941 quarterly every quarter and a form 940 at the end of the year as well as W2s and a summary W3. So those look like this. This is just from irs.gov. This is a 941. So this is gonna show basically the federal income tax, the social security and Medicare and we've gotta report that quarterly. It's like an informational type of form similar to a form 1040 on the individual side of things. It should be just an information form meaning we're not gonna pay any tax or get a refund because unlike the 1040, the income taxes it should be more of like a flat tax on these. So we should be able to have paid the proper amount of tax and this is just an information return to verify that we have done so most companies have to do that on a quarterly basis but if you have limited payroll you might not need to do it quarterly. And then you've got the 940 which is the yearly reporting and that's the employer's annual federal unemployment or FUTA and a lot of people you would think that that would be summarizing your 941s but it's actually different. It summarizes to some degree the earnings but this is for the federal unemployment which is a different kind of tax. It's an employer only tax and you only have to report on it for the year end reporting on the 940. And then of course you also have the W-2s that you have to issue and you've got the W-3 that's a summary of all the W-2s. So those reports are quite nice to have you're gonna want help with them typically and usually the software if you have the payroll turned on part of the big benefit is they're gonna help you to process these forms the 940s, the 941s and the W-2s and W-3. So that's the general process with the payroll. If you've got payroll turned on within the accounting system then you'll be working over here in the payroll area where you have the employees so you've got your employees here and you'd be processing the payroll through here. I won't go into a lot of detail in that process but we'll dive into it a little bit more in the practice problem. And then of course when you process the payroll it's gonna have an impact on the checking account typically when you process the payroll and possibly payroll liability accounts on down below. So that's just basically the cycle of payroll. We'll talk more about it in the second half of the course when we start to process the payroll. Also just a quick note if you go into the reports here and you go into your reports on the left hand side then if you're doing the payroll within the system you'll have various payroll reports on down below and they can get quite detailed because again there's a whole lot of data within payroll that you need to be doing. So just a quick recap when you're thinking about payroll you wanna think do I wanna do it within QuickBooks or do I wanna do it outside of QuickBooks with like an ADP, a third party. If I do it within QuickBooks I wanna pay for it and decide how much I wanna pay for the add on feature to do it within the system and noting that the system's gonna have a whole lot of added detail within it with regards to reports and whatnot that are related to payroll. If I do it outside of QuickBooks with a third party then I just need to pull in the information that's necessary to make the financial statements correct. So I don't need all the detail of well this is all the withholdings per person, per paycheck, per on a year to date basis and on a basis of right I only need the data to make the financial statements correct as of a specific point in time which you could come up with a system to basically be in a cashed based system and then use your accountant at the end of the year and ADP or paychecks or the third party payroll reports to make your financial statements correct periodically as of the date you need to do your taxes or whatever financial reporting. But that's the option with the third party software so you won't have all the detail within the system. And then from there if you're doing the payroll within the system or either way you do the payroll the cycle of payroll is going to be you're gonna have to turn on payroll or set up your payroll and then you're gonna be determining how often you're paying and you typically wanna standardize that for all employees although you don't have to are you gonna be doing it weekly, semi-weekly, bi-weekly or monthly and then obviously you'll process payroll based on those timeframes and then you'll pay the liabilities that you withheld and your payroll taxes generally fairly soon after you process each payroll check and then you have the other cycle of the payroll reporting in a similar fashion as with the individual income taxes on the form 1040 but with payroll you gotta report quarterly that's the 941s and then yearly which includes a 940 as well as the W2 reporting and the grouping of the W3 reports that you'll need there as well as any state reporting which will be dependent upon the state that you are in.