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QuickBooks® Payroll Tips and Shortcuts

Here are some steps to make payroll easier.

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Structure your payroll liability accounts —>
  1. Memorize these rules.
    1. QuickBooks® Pay Liabilities should always be double checked against the Liability Account Balance.
    2. The date that counts for liability payments is the check date, not the pay period dates.
  2. To be safe from penalties, you have to format your accounts so you can reconcile the accounts.
    1. QuickBooks® sets up payroll with a single Payroll Liabilities Account.
    2. You will have more control over your accounts if you make sub-accounts for 941 Accounts, ESC, Futa, Child Support and insurance or IRA deductions if you have them.
      1. The easiest way to do this is to edit these accounts from the Payroll Item List.
      2. Go to Lists, Payroll Item Lists.
      3. Double click Federal Withholding and click next until you get to the Agency for employee-paid liability window. Edit the Liability Account to read Payroll Liabilities:941 Accounts. Hit tab key and then enter, enter, enter until QuickBooks® has set up the account and returned you to the window. Then click next until you can click finish.
      4. Double click Social Security Company and click next until you get to the Liability agency window. Edit the Liability Account to read Payroll Liabilities:941 Accounts. Then click next until you can click finish.
      5. Double click Medicare Company and the step above.
      6. Double click Federal Unemployment and click next until you get to the Agency for company-paid liability window. Edit the Liability Account to read Payroll Liabilities:Futa. Hit tab key and then enter, enter, enter until QuickBooks® has set up the account and returned you to the window.
      7. It will prevent you from ever making a mistake combining the Futa payment with your 941 payments if you change the name of the vendor for Futa payments. For example, if your vendor for 941 payments is your bank name, make the name of the vendor for Futa payments “(bank name” Futa. Or if your vendor name is EFTPS, then make your Futa vendor, EFTPS Futa. Then click next until you can click finish.
      8. Double click Alaska Unemployment Company and click next until you get to the Liability agency window. Edit the Liability Account to read Payroll Liabilities:ESC. Hit tab key and then enter, enter, enter until QuickBooks® has set up the account and returned you to the window. Then click next until you can click finish.
      9. Repeat the step above for any other deductions. Then test that you have restructured all your deductions by running a Balance Sheet as described below.
    3. Create a Balance Sheet and review your liability accounts. If QuickBooks® creates an Other account, double click it to see what’s there and then create a sub-account for that item. Continue to create sub accounts for each type of item you find in the Payroll Liabilities – Other account until you can create a Balance Sheet and Payroll Liabilities – Other does not appear.
      1. Repeat until the Other account no longer shows on the balance sheet.
  3. When paying your 941 taxes, always confirm that you are paying the total amount due.
    1. Go to Lists, Chart of Accounts.
    2. Look for your Payroll Liabilities, 941 Accounts account.
      1. Balance of account should be zero if you are making your payment before you have entered another payroll.
      2. If you are making your payments after you have done another payroll, the account balance will not be zero after a payment.
        1. Double click the account name to view the register.
        2. Scroll up to the last payroll in the quarter and be sure that the amount you paid is equal to the amount you paid.
      3. You can schedule your 941 payments
        1. The easiest time to make a 941 payment is at the same time that you are doing payroll.
        2. If you are using EFTPS, you can schedule your payments for the due date when you call them in. This makes it possible to get the payment recorded when you are doing payroll and so thinking about payroll issues.
  4. Reconcile your Payroll Liability Accounts
    1. You can reconcile these account just like your bank account.
      1. The starting and ending balances should always be zero.
      2. It’s a good idea to do this quarterly when you are paying your taxes.
      3. It’s quick if you set your ending date to the last day of the quarter you are reconciling. Then just hide entries after that date, mark all.
      4. Then unhide all entries and scroll down to any payments you made after the end of the quarter and check those entries. That should bring your difference to zero.
Preparing your payroll reports in Alaska —>
  1. Federal Forms: 941 Report for Federal Withholding and FICA (Social Security and Medicare)
    1. The 941 report is filed quarterly generally on or before April 30, July 31, September 30 and January 31.
    2. Your 941 final payroll tax payment is due no later than the 15th of the month following the quarter.
    3. Confirm that your 941 tax is paid for the quarter by reconciling your 941 account. Your opening and closing balances should be zero and you can reconcile the account just as you would a bank account.
    4. Print a Payroll Summary for the Quarter. Modify the report to just show the money column leaving out the rate and hours.
    5. Create your 941 report: Employees, Payroll Tax Forms & W2s, Process Payroll Forms in most versions of QuickBooks.
    6. If you have few employees and don’t have the payroll service that creates forms, the 941 fill in form is available at http://www.irs.gov/pub/irs-pdf/f941.pdf
    7. Your form should match the totals shown on your Payroll Summary.
    8. Mail the completed, signed form no later than the last day of the month following the end of the quarter.
  2. Federal Forms: 940 Report for Federal Unemployment (FUTA)
    1. The 940 report is filed annual generally on or before January 31.
    2. Your 940 payments should be made quarterly unless you are absolutely certain that your 940 liability for the year will not exceed $500.
    3. The 940 report does not have a line to adjust factions of cents so it is best to complete the report at the same time you are making the final payment.  You can then pay a penny or two more or less so that the balance due on the report will be zero.
    4. The 940 account can be reconciled exactly as the 941 account is reconciled after the report is prepared and the final payment is made.
    5. Create your 941 report: Employees, Payroll Tax Forms & W2s, Process Payroll Forms in most versions of QuickBooks.
    6. The fill in form is available at http://www.irs.gov/pub/irs-pdf/f940.pdf
    7. Once you have started the form, you can note the balance due and either adjust Line 13 Futa Tax deposited for the year to include the amount required to bring the total due to zero (making note of the amount and making that payment online, by phone or at your bank) or you can pay the balance due by check with the form.
  3. State Forms: Alaska Quarterly Contribution Report (ESC)
    1. The ESC report is due quarterly generally on or before April 30, July 31, September 30 and January 31.
    2. After the ESC tax is paid for the quarter you can reconcile your account. Your opening and closing balances should be zero and you can reconcile the account just as you would a bank account.
    3. Some QuickBooks payroll subscriptions include the Alaska state form and will fill it in automatically for you.
    4. You can file the Alaska form online at https://myalaska.state.ak.us/home/app?service=external/launch&pubid=tos
    5. Fill in forms, pdf and Excel formats, are available here http://fg/fathomgraphics.com/bookkeeperlinks.html
    6. Use the Payroll Summary you printed to proof or fill in the form of your choice.
    7. If the amount due on the form is not within pennies of the amount due when you use the Pay Liabilities feature in QuickBooks, you must research the problem.
    8. Check that you have the correct percentage entered for the employer’s portion under Lists, Payroll Items, AK - Unemployment Company.  You should have received a notice from the State of Alaska in December of the prior year and changed your percentage for this year prior to the first payroll.
    9. If you need to change the percentage after you have done a payroll, remember to pay close attention to completing your 940 return at the end of the year.  You may need to adjust the amount paid to the state unemployment on that form.
    10. If the percentage is not the source of the difference, then use your Payroll Summary to review each employee checking that each has ESC tax amounts. Look for employees such as owners who might need to be excluded from the report.
    11. It is easy to overlook setting up employees for ESC tax when you enter a new employee, It’s a good idea to set your payroll preferences to include this tax by going to Edit, Preferences, Payroll & Employees, Company Preferences, Employee Defaults.
Finding problems with your Alaska Quarterly Payroll Report —>

Quarterly 941 Report and Alaska Quarterly Report Should Match. It is a good idea to check them together and file them at the same time to be sure that the amounts can be reconciled.

  1. If you are required to file 944 reports, you can still run (but NOT file) the 941 report quarterly to find problems and solve them throughout the year.
  2. The 941 report Line 2 Wages, Tips and other compensation should match the total reportable wages on your Alaska Quarterly Contribution Report. (ESC report).
    1. Exceptions:
      1. Company’s owners are exempt from ESC taxes.
      2. Health or life insurance that is exempt from ESC but not exempt from 941 taxes.
        1. Get a professional to review your books and resolve differences if there are employee-paid deductions for health or life insurance.
  3. Compare your totals.
    1. Print out a quarterly report.
      1. Go to Reports, Employees and Payroll, Payroll Summary.
      2. Print the report for the quarter.
    2. Check that the total adjusted gross wages matches your 941 report Line 2.
    3. Compare the total adjusted gross wages to your ESC report.
      1. Subtract the adjusted gross wages of any exempt employees from the total adjusted gross wages to get the total ESC reportable wages.
    4. It is a good idea to print this report every time and keep the checked off report along with your tax forms.
  4. Reconciling Differences: First find where the differences are and what caused them.
    1. Check that your rates are set correctly in QuickBooks.
      1. Go to Lists, Payroll
        1. Double Click AK
        2. Click Next, Next, Next until you get to the screen that shows the percentages.
        3. Check that these percentages match the percentages shown on the ESC report you received from the state.
    2. Review that all employees are set up correctly.
      1. Scan the Payroll Summary you printed on the two lines labeled AK-Unemployment Employee and AK-Unemployment Company.
        1. All employees except exempt employees should have an amount greater than zero.
        2. Exempt employees should be zero on both lines.
        3. If you find a covered employee with zero accumulated, edit that employee’s record by going to Employee Center and double clicking the employee name. Change Tabs to Payroll and Compensation Info, click the Taxes button, and then click the state tab.
        4. Follow #3 above to correct exempt employees who are not zero on both lines.
      2. Find the problem employee(s).
        1. If there are exempt employees, subtract their Adjusted Gross Pay from the Total Adjusted Gross Pay to get the Total Reportable Wages.
        2. Multiply the Adjusted Gross Pay (or Total Reportable Wages) times .005 (2010 employee percentage). This total should equal the total shown for Taxes Withheld: AK-Unemployment Employee.
          1. Your answer should be within a few cents of matching.
          2. If it matches, then your employee’s net paychecks should reflect the correct deduction for ESC tax.
          3. If this total check does not match, then test each individual employee’s Adjusted Gross Pay (or Total Reportable Wages) by multiplying by .005 and comparing with the number on the QuickBooks report.
            1. This will identify the individual employees whose ESC taxes are not calculated correctly.
        3. Multiply the Adjusted Gross Pay (or Total Reportable Wage) times the Employer’s Contribution percentage shown on your Quarterly Report blank received from the State of Alaska or from the letter you received in December of the previous year with this percentage. This percentage is different for every Alaskan employer. This total should equal the total shown for Employer Taxes and Contributions: AK-Unemployment Company.
  5. Determine which quarter has a problem.
    1. You can reconcile your payroll liability accounts just like you reconcile your bank account.
    2. First, follow the instructions to set up your payroll liability accounts so that each type of tax has it own account. You may have done this already.
    3. Now reconcile your ESC Liability Account.
      1. Go to Banking, Reconcile and select the ESC Liability Account.
      2. The starting balance should be zero. Enter zero for the closing or ending balance.
      3. If you have never done this before, set the date for 12/31 of the prior year. Or skip this step if prior years are reconciled.
        1. The easiest way to get started is to click Mark All, then uncheck anything dated in the current year.
        2. Most likely you paid your fourth quarter ESC tax in January. Look for that payment and mark it. There should be two entries.
        3. Your reconcile difference should be zero so click Reconcile Now. It will take a few minutes to clear the entries. There is no need to print the reconciliation.
        4. If your difference is not zero, and you know that your ESC taxes are paid in full for all prior years, you can make a journal entry to clean out the account and get a clean start.
          1. If you have not turned your books over to your CPA to do the prior year taxes yet, date your entry 12/31. Otherwise, date it 1/1.
        5. You can make the entry directly in the ESC register.
          1. Go to Lists, Chart of Accounts.
          2. Double Click the ESC Liability Account
          3. Make an entry equal to the difference in your reconciliation window posting to your Payroll Expense or Payroll Tax Expense Account.
        6. Return to the reconcile window and click the entry you just made. Your difference should now be zero and you can click Reconcil Now.
      4. Reconcile the current year by quarter.
        1. Go to Banking, Reconcile and select the ESC Liability Account.
          1. Set the date for 3/31.
          2. The starting balance should be zero. Enter zero for the closing or ending balance.
          3. Reconcile all paychecks dated from 1/1 to 3/31.
          4. Reconcile the payment made in April. There should be two entries to click.
          5. Your balance should be zero. You can click Reconcile Now.
          6. If it reconciled, then repeat these steps for the remaining quarters.
          7. If your balance is not zero, you have a problem in the first quarter.
  6. Correcting any problems. (More to be posted soon.)
Summarize payroll data in Excel —>
  1. The Summarize Payroll Date in Excel feature can be found under Reports, Employees & Payroll.
    1. It automatically creates a series of spreadsheets displaying payroll data in many formats.
  2. Using Summarize Payroll Data to complete unemployment reports
    1. The Summarize Payroll Data in Excel feature works very well.
    2. If you want to use the Excel data that QuickBooks® creates, convert the formulas before you try to copy. Select the entire worksheet, Copy, Paste Special, Values.
    3.  You can make an Excel form you can paste the data in so it can auto calculate the totals.
    4. The totals you get when you fill in the form should match the totals in QuickBooks®.
    5. This is the only report that gives you the total for line 3, Excess Wages to complete the ESC report.
Advice and tips provided on the Fathom Graphics website are not a substitute for advice from your CPA, tax preparer or attorney. We are not CPAs or attorneys and do not provide legal or tax advice.