How to Setup Enhanced Payroll Correctly the First Time

Enhanced payroll combined with the discipline to make payroll tax payments on time is a great tool within QuickBooks. What makes it a great tool is when it’s setup properly, mapped and the liabilities are tracking to help you make your payments timely.

However, at CBG, we often get distressed calls when a client has not set up the payroll correctly and doesn’t understand what went wrong.

There are a few key areas you need to know when facing a payroll setup project:
  • Payroll information, employee information, and any payroll data cannot be imported. It’s an area of QuickBooks that is locked down for security purposes.
  • Pre and Post-tax items must be set up correctly before a payroll is processed. Otherwise, any checks run incorrectly have to be edited and it’s very tedious. Often like brain surgery.
  • SUTA tax needs to be set up using the correct rates from January 1st. The liability flows better and you can trust your data is accurate without manual adjustments.
  • Pay stubs should be correct. If you provide a pay stub to an employee, it should have your current gross wages listing all the payroll deductions as well as your year to date totals so far this year.
  • We recommend starting with the beginning of the year and entering in each check to match the actual check given to your employee.

As with any payroll project, it is best to manually enter in these payroll checks after you have the pre and post deductions so that they are taxed properly for Federal, FICA, Medicare, State, State Unemployment (SUTA). It’s also important that you have the correct SUTA rates entered before you begin.

Our recommendation is to enter each check and use Federal withholding to adjust for any pennies. Make sure pre/post deductions are taxing properly, being careful to match with your prior system. The end result is that your Form 941, Form 940, State Quarterly reconciliation and your State Unemployment tax returns are populating correctly and tying out to the reports filed.

Do not skip any employees, even if they are terminated. They will still be counted in your payroll tax returns and will receive a W2 at year end.

As a seasoned ProAdvisor who loves payroll setup, I have had many of these projects come across my desk. When clients do not follow my advice, the project becomes huge and can cost $7,500-15,000 to untangle. For example, if you have bi-weekly payroll and are at mid-year, that’s 13 weeks worth of checks. Each week must be fixed in date order and tied down. If you have ten employees, that’s 130 checks you have to open up and have recalculated.

We have done these many times over the years, and the customer is happy that it’s finally working correctly in QuickBooks, but they are usually shocked at the total cost. The reason it costs so much is that by not following my advice and skipping ahead they inadvertently created more work. Processing payroll before the setup is correct and not starting in January; you will have to manually open up each check again to make sure the taxes are recalculated using the updated payroll item codes and SUTA rates. This process is intricate and must be done with precision, like brain surgery.

I know this is a project that is very tedious and takes a QuickBooks ProAdvisor who understands payroll to do this properly. If you are a client or a partner that needs support with a project, contact CBG to work with one of our specialists to do this right.