It’s one of the most challenging elements of accounting – and one that must be absolutely accurate and timely.
That sigh of relief you breathed when you finished your initial payroll setup could probably be heard in the next office building. This is a daunting task, and you should be proud of yourself for getting through it.
But you know that payroll data isn’t carved in stone. Payroll taxes change regularly on the federal, state and local levels. And as your employees’ lives change, so, too, do their payroll requirements.
You’ve heard about the penalties and fines that the IRS can levy if your payroll taxes aren’t correct, and your employees won’t be happy if you don’t make needed changes. So stay compliant. Here are some ways to do that:
- Update payroll tax tables frequently. QuickBooks recommends that you do this every time you pay your employees (or at least every 45 days). Go to Employees | Get Payroll Updates. It’s not just data that changes: Taxing agencies sometimes change the forms themselves. So this is critical.
- Stay on top of changes in staff tax status. When you set up your payroll system in QuickBooks, you entered default information that included default tax-related values for all employees that were automatically applied to everyone. Your payroll updates will handle these global changes. But if you need to change data for an individual employee, go to the Employee Center and click on the Employees tab. Double-click on the correct name and select Payroll Info and then the Taxes button.
Figure 1: Your employees count on you to make any changes in their withholding status.
- Don’t use Write Checks when you’re prepaying payments for your payroll tax liabilities. QuickBooks needs to know when you’ve fulfilled an obligation, and your reports will not be accurate if you simply dispatch a check. Go to the Pay Scheduled Liabilities box in the Payroll Center.
- Set up payroll user permissions carefully.Only you or a very trusted employee should be able to create, print, e-pay and e-file transactions and forms. Full Access should be restricted to you and your accountant. Go to Company | Set Up Users and Passwords | Set Up Users.
Figure 2: Be very careful about assigning user permissions to payroll-related tasks.
- Know when to start over. If you’ve made some changes to an employee’s paycheck but got interrupted and forgot what you did, right-click on his or her name in the employee list and select Revert Paycheck. Begin again rather than guessing.
- Use the Payroll Item List. You’ll need to open the Employee Center and Payroll Center for many procedures, but you can also accomplish a great deal from the Payroll Item List window. Seeing this screen regularly also helps you get more familiar with your Chart of Accounts. Open the Lists menu and select Payroll Item List. You can access numerous tasks – like setting up payroll, paying employees and payroll taxes, processing forms and running reports — by highlighting a payroll account and right-clicking or by opening the menus in the lower left corner of the screen.
Figure 3: Use the Payroll Item List and its menus for some of your payroll tasks.
- Don’t edit payroll tax amounts on your own. Some payroll tax rates aren’t updated in your payroll tax tables, and QuickBooks lets you edit them manually. Let us help you with this, at least the first time you do it. Incorrect rates can cost you money and time.
QuickBooks lets you create some sophisticated payroll reports in Excel, but here, too, let us walk you through this since the process involves macros, which can be tricky. We hope you’ll contact us with any questions you have about payroll so that your relationships with taxing agencies – including the IRS – remain in good standing.