A Guide to Set up Payroll in QuickBooks for Beginners

Are you dealing with problems with QuickBooks payroll or facing difficulties in setting it up on your system?

Congrats! You got yourself at the correct place, as this blog in detail talks all about how to do payroll in QuickBooks and the proper methods to set up the payroll service in both QuickBooks Desktop and QuickBooks Online.

Doesn’t matter if you are new to the QB payroll service or aren’t related to the IT field anyhow; we have got you covered. Just keep reading till the end and apply the procedures stepwise, as elaborated in the blog. We have also discussed the benefits of using the QB Payroll and the features it offers once you subscribe to the service.

Advantages of Setting up Payroll in QuickBooks

Payroll setup in QuickBooks can be easily done by following the procedure discussed later in the blog. Before you get to that, we insist you go through the benefits of setting up payroll in QuickBooks to get a thorough understanding of how the service impacts your business performance and allows you to focus on crucial tasks other than employee payroll and tax filing-

Seamless Tax Submission: QuickBooks Payroll helps calculate, file, and pay your taxes with uttermost accuracy and also protects tax penalties in case discrepancies occur during tax submission.

Automatic and Quick payroll disbursal: QuickBooks Payroll ensures that your employees are paid on schedule and saves you from time-consuming manual entries.

Time Tracking and Customizable Reports: QuickBooks Payroll helps in managing multiple time sheets, creating customizable reports for business analysis, and mobile app tracking to always stay in control of the tasks.

24/7 Tech Support: Experts are always available to help you out while setting up your payroll account and filing the taxes.

Manage Employee Payroll Data in One Place: QuickBooks gives you the accessibility to store your employee data and streamline the HR tasks to manage your team efficiently.

E-File 1099s: You can electronically file unlimited 1099-MISC and 1099-NEC forms using QuickBooks Payroll.

Procedure for payroll set up in QuickBooks

Setting up and using the QB Payroll service is painless if you follow the correct technique shared by Intuit and QB experts. We have enlisted detailed procedures to setup payroll in QuickBooks Desktop and QuickBooks Online-

Here’s how to set up payroll in QuickBooks Desktop

You can buy a QuickBooks Payroll subscription Online, by phone, or at your nearest retail store. You can find the steps to activate the payroll subscription below-

Step 1-Activate QB Payroll subscription

Subscription purchased by phone or online

You’ll get a 16-digit service key in your email if you buy a QB Desktop Payroll subscription by phone or online. The following steps showcase how to activate the subscription and set up payroll on QuickBooks Desktop Enhanced-

1. Open your QB Desktop company file and click Employees.
2. Select Payroll and click the Enter Payroll Service Key option.
3. Tap Add and fill in the service key received at the time of purchase.
4. Hit Next and then click Finish.

Subscription purchased from a retail store

Implement the following steps if you purchased a QB Payroll subscription from a retail store-

1. Open your QB Desktop company file and go to Employees.
2. Tap Payroll and click Install Payroll from box.
3. On the Payroll Activation Page, enter the Payroll License and Product Information mentioned on the yellow sticker on your CD.
4. Tap Continue and follow the on-screen instructions to complete the payroll activation.

Step 2- Complete the Payroll Setup

You’ll have to add your employee data—federal and state payroll taxes and any payments made this year. The steps to start setting up the payroll tasks in QB Desktop Enhanced are-

1. Launch your QB Desktop and go to the Employees menu.
2. Click Payroll Setup and follow the on-screen instructions to enter the data manually.

There’s a checklist you must go through before setting up payroll in your QuickBooks Desktop. This prevents you from getting into problems later. Here’s the list of items you must have (Available from your previous payroll service provider, accountant, or federal agencies):

Employee Data-

Apart from having a complete TD1 form for each employee, you also need the following things-

• • Pay Rate- Tips, cash bonuses, hourly, salary, commission, etc.
  • Paycheque Deductions- Tax amount deducted for employee’s retirement plans, savings plans, and Medicare plans.
  • Pay Schedule- Weekly, Monthly, or Semi-Weekly.
  • Sick/Vacation Allowance- If allowed in your organization.
  • Hire & Termination dates

Tax Info-

You’ll also have to add the federal and state taxes for each employee and might need the following to do so-

• • Federal Employer Identification Number (FEIN) or Canada Revenue Agency (CRA) Business Number.
  • State Tax Rates
  • State Withholding and unemployment account numbers
  • Frequency of Federal and State tax deposit

Pay History-

If you haven’t paid your employees this year, you don’t need to add anything. However, if you sent the payments, you’ll have to add all the employee paychecks and tax payments you have made this year. The pay history might include paycheques for the current quarter and prior quarter, year-to-date totals for each employee, etc.

Step 3- Review and Verify

In case you have any payment history, you must enter state and federal tax filing details for closed quarters to ensure QB checks the payment history for any errors and the W-2 forms are correct at the end of the fiscal year. You’ll require Quarterly federal and state payroll tax forms or closed quarters (941, State unemployment Insurance, etc.)

Note: QuickBooks Desktop does not require a subscription to set up manual payroll. But you’ll have to manually compute and enter the taxes, which could lead to inconsistencies. To set up manual payroll in QuickBooks Desktop 2018 or later, follow these steps:

1. Click the Edit drop-down menu in your QB Desktop and select Preferences.
2. Click Payroll & Employees and select the Company Preferences tab.
3. Ensure the Full Payroll and Manual Payroll checkboxes are marked in the QuickBooks Desktop Payroll Features section.
4. Tap Next in the Get Payday peace of mind window and click Activate in the confirmation screen.
5. Click OK twice to apply the changes and exit the preferences window, respectively.

You now know how to set up payroll in QuickBooks Desktop Enhanced and the things you need to avoid any problems in the process. Now, you must learn how to set up payroll for small businesses in QuickBooks Online.

Here’s how to set up payroll in QuickBooks Online-

You have the option to choose from QuickBooks Online Standard, Core, or enhanced payroll. Follow these steps to learn how to set up payroll in QuickBooks Online-

QuickBooks Online Standard Payroll Service

You’ll have to turn on Standard Payroll if you switch from another payroll service provider to start using the QB Payroll tasks with ease. Follow these steps-

1. Sign in to your QuickBooks Online account and go to the Payroll option on the left.
2. Click the Choose your plan option and select Standard Payroll.
3. Select Start 1-month free trial and go to the Employees or Payroll menu.
4. Click Let’s Go to set up payroll in QuickBooks Online.
5. If you want to import data from previous payroll software, click Yes, import my data Otherwise, click No, make a fresh start.
6. Select whether this is your employee’s first payment or if they have already paid before and tap Next.

TIP: After completing the setup, you can make changes any time in the future by using these steps-

1. Tap Settings in QuickBooks Online.
2. Select Account and Settings and click Payroll.

The following steps must be followed to setup payroll in QuickBooks Online Standard-

Step 1- Select the correct tax year

You’ll have to enter the tax year from which your employees will start getting paid. Select Before (6 April) if you want to pay your employees in the current tax year or After if you will start paying your employees after 6 April and they’ll fall into the next financial year. Select Save and Continue.

Step 2- Provide your basic info

You must review and verify your details to ensure all the information provided in the forms given to the employees is legally correct. Make sure your Company Name and Address are correct, and click Save and Continue.

Step 3- Select the employee pay schedule

Before saving the company pay schedule, you need to set up the frequency with which you’ll pay your employees. This is also necessary to avoid any tax implications if you recently switched from a different accounting software. Use these steps-

1. Choose if you want to pay the employees Every Month or Week.
2. Select the initial date your employees will start receiving the payments.
3. Set the number of days your employees are being paid.
4. Give this schedule a name and tap Save and Next.

Note: You are allowed to make changes in the pay schedule until you submit your first payroll. Once done, you’ll have to delete the entire payroll to make any changes.

Step 4- Assign a Workplace pension plan

You can use the following steps if your business requires you to set up a pension plan for your employees-

Enter your duties start date and choose one option from the following (as mentioned on the screen)

• I’m a director-only business.
• My employees are all under 21 or over the SPA (State Pension Age) or they earn less than 10k/year or the equivalent pay period.
• Some or all of my employees are between 21-SPA years old and they earn more than £10k/year or the equivalent in a pay period.

You’ll only have to complete the workplace pension setup for the third option, as the other two do not require it. Click Add a Workplace Pension to set up the pension plan you have in mind, and tap Save and Next.

Step 5- Claiming Employment Allowance to reduce expenses

Employment allowance helps reduce the insurance amount if your business is qualified. You can check if you are qualified by visiting the HMRC website. If you do, follow these steps-

1. Click Yes, I qualify, and select your business sector.
2. In case you click No, I don’t qualify, you’ll have to pay your normal employer’s National Insurance contributions.
3. Tap Save and next to complete your payroll setup.

Step 6- Switch on RTI (Real Time Information) reporting

A Full Payment Summary (FPS) must be submitted to HMRC (HM Revenue and Customs) whenever you run payroll. You are advised to switch on the RTI whenever you set up payroll in QuickBooks Online. This will automatically send the PAYE (Pay As You Earn) report to HMRC in real-time. Here’s how-

Note: You must have the following details to turn on RTI reporting in QuickBooks-

• Government Gateway credentials & HMRC reference number.

• You can register your business with HMRC if needed and activate your USER ID and password within 28 days of receiving it from HMRC.

• If you do not receive the employer PAYE reference from HMRC, do not forget to submit the payroll as soon as you receive it.

1. Click the Gear icon in your QuickBooks and select Account and Settings.
2. Select the Payroll tab and click the Pencil icon beside Online Filing with HMRC.
3. Fill in your Government Gateway User ID and Password.
4. Click Save Gateway credentials to avoid filling them every time.
5. Select the Submit FPS automatically to HMRX with payroll checkbox to submit an FPS filing each time you run payroll.
6. Tap Save and click Done.
7. Go to the Pencil icon in the Payroll tab again and fill in your PAYE Reference and Accounts Office Reference.
8. Tap Save and Done.

Step 7- Set up Employer’s Relief (SER)

If your business qualifies for Small Employers Relief, you might be able to claim 100% of the value of legal payments made to the employees apart from sick pay and an additional 3% of the value as ‘Compensation from the HMRC’. Here are the steps to set up SER in QuickBooks-

1. Click the Gear icon in your QuickBooks and select Account and Settings.
2. Go to the Payroll tab and click the Pencil icon beside Employers NI relief.
3. Click Yes, I qualify if your business qualifies for SER, and QuickBooks will notify HMRC automatically.
4. In case you paid any statutory paternity or maternity pay between April 6 and the day you used QB Online Payroll, tap Yes.
5. Type the Recovery and Compensation amount and Save your changes.
6. Tap Done.

Now, let’s discuss how to run payroll in QuickBooks Online Advanced or Core Payroll service.

QuickBooks Online Core or Advanced Payroll service

Before you learn how to set up payroll on QuickBooks Online, you must figure out the current plan you are using. These are the steps-

1. Access the Settings menu and select Subscriptions and Billings.
2. You’ll find your payroll plan in the second box.

Once you know the payroll plan you’ve opted for, follow these steps to set up payroll and start paying your employees seamlessly-

Step 1- Initiating the payroll setup

You might have to wait for up to 24 hours to sync your product with the QB Online file while adding payroll service to your QB Online. Apply these steps to begin the payroll setup-

1. Use the primary admin credentials to sign in to your QuickBooks Online.
2. Go to Payroll and select Overview.
3. Click Get Started and select if the employees are paid this financial year.
4. Enter the date from which you want to pay your employees with the help of QuickBooks.
5. Fill in your business address (main) and add secondary locations later while adding new employees.
6. Fill in the contact details of the person assigned to pay the employees. He/she will receive payroll notifications and might engage with payroll experts for queries related to their payroll account.
7. Choose how you used to run payroll previously.

Step 2- Finish the payroll setup tasks

You need to be patient while feeding payroll information into QuickBooks, as the setup is designed to add information according to your convenience. These are the steps you need to follow-

1. Go to Payroll and click Overview.
2. Choose the Task you want to perform.

Employee Info- Before running the payroll, you need to add some basic info about your employees, like-

• Your employee’s P45, P60, and other payroll forms.
• Hiring date.
• Birth date.
• Pay rate.
• Deductions like workplace pensions or loan repayments.
• Sick, holiday, PTO accrual rates and balance.

Tax Information: You must add your payroll tax info to ensure federal agencies can access your business records easily. You must add-

• PAYE Reference number.
• Accounts Office reference number.
• Unique taxpayer reference number.
• HMRC Credentials.
• Details of any legal payments received.
• Company legal name and address.

Payroll history- You need to fill in the total pay info for each employee from their P45 forms. This is the info you need-

• Total pay till date paid to your employees by other employers this fiscal year.
• Total tax till date paid by your employee’s formal employer this fiscal year.

Conclusion

This blog acts as a referral guide on how to do payroll in QuickBooks Desktop as well as QuickBooks Online. We shared all the details and things to keep in mind while setting up the payroll service in the accounting software. A stepwise procedure to activate and set up the payroll service is discussed in the blog, and we expect it will help you set up payroll service in your QuickBooks painlessly.

FAQ

What is a requirement for using payroll in QuickBooks?

QuickBooks Payroll service is required by employers to keep all the employee data in one place, process their salaries, calculate taxes, and file them at the end of the financial year. Using the payroll service saves time, improves accuracy, simplifies payroll compliance, organizes record-keeping, reduces payroll errors, generates automatic payslips, and provides portable access to payroll data.

Can QuickBooks do payroll accurately?

QuickBooks is the best software for managing small and midsize businesses and covering all their bookkeeping needs. Apart from flawless calculations, the software also allows the creation of payroll reports to share insights with your accountant. The entire payroll process is automated by QuickBooks, and you can be stress-free about tax calculation and submission.

What information is needed to run QuickBooks payroll?

You basically need the following info-

• Employee data– Legal name, address, social security number, and bank account info.
• Wages- Number of employment hours, Sick leaves, bonuses, and other tips.

Deductions– Health insurance premiums, retirement plans, and all the Federal and state taxes.

QuickBooks Desktop VS QuickBooks Online which is better at processing payroll?

Both QuickBooks Desktop and Online serve as the best options to process payroll. However, depending on the features, cost, accessibility, and cost, you can make your decision.