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How to Get the Taxes Stuff Right in Quicken 2012

Besides setting up a payroll tax category to track payroll taxes that the employer pays, including the company’s share of Social Security taxes, the company’s share of Medicare taxes, and any other employer payroll taxes (such as federal unemployment tax or the equivalent state employer taxes), you need to do a couple of things in Quicken 2012 if you want to do payroll the right way in the U.S.A.

  • Request (or demand) an employer ID number

    First, you need to file an SS-4, or Request for Employer Identification Number form, with the Internal Revenue Service (IRS) so that you can get an Employer Identification Number. You can get this form by calling the IRS or by visiting the IRS website.

    In one of its cooler moves, the IRS allows you to apply for and receive an Employer Identification Number right online. Visit the IRS website, and then click the Apply For An Employer Identification Number (EIN) Online link located on the left side of the page.

  • So what about Social Security, Medicare, and withholding taxes?

    You need to do two things before you can figure out how to handle all those taxes. First, you need your employees to fill out W-4 forms to let you know what filing status they’ll use and how many withholding allowances, or personal exemptions, they’ll claim. You can get blank W-4 forms from the IRS website, too.

    While you're visiting the IRS website, you also need to get a Circular E Employer’s Tax Guide publication. The Circular E publication is the pamphlet that tells you how much you should withhold in federal income taxes, Social Security, and Medicare from employees’ salaries based on what they say about their filing statuses and the number of withholding allowances they claim on the W-4 forms.

  • Figure out the gross wages figure

    Determining how much to pay your employees should be pretty easy. Does Raoul make $15 per hour? Did he work 40 hours? Then you owe him $600 because $15 times 40 equals $600.

  • Calculate that deductions stuff

    To determine this amount, you need Raoul’s W-4 to find out his filing statuses and personal exemptions. Then just flip to the page in the Circular E that describes withholding for persons claiming those filing statuses and weekly pay.

    If Raoul is single and claims just one personal exemption, for example, you need to flip to the page that shows appropriate withholding amounts for single people receiving weekly payroll checks. That page shows a table that will clearly indicate what you’re supposed to withhold from Raoul’s check for federal income taxes.

    For example, the table might say that a single person making $600 a week who claims one withholding allowance should have $79 withheld for federal taxes.

    You determine Social Security and Medicare amounts by multiplying the gross wage figure by a set percentage. Social Security is probably 6.2 percent of the gross wages up to roughly $110,000. The Medicare tax is 1.45 percent of the gross wages with no wage limit.

    Be sure to check your faithful Circular E if you think limits come into play for a particular employee. Congress is tinkering with the tax laws again.

  • Work with other taxes and deductions

    If you have other taxes and deductions to make and you know how the federal income taxes, Social Security taxes, and Medicare taxes work, you won’t have any problem working with other taxes — whatever they are.

    State income tax withholding, for example, works like the federal income tax withholding. (Of course, you need to get the state’s equivalent to the Circular E guide.)

Record a payroll check

After you make the tax deduction and net wages calculation, you’re ready to record the check. Suppose that you’re going to record the check by using the Write Checks window. After you display the window, follow these steps:

  1. Enter the date of the payroll check in the Date field.

  2. Enter the payroll check number in the Num field.

  3. Enter the employee name in the Payee field.

  4. Enter the net wages amount in the Payment field.

  5. Categorize the payroll tax as wages.

    Specify the expense category as Wages.

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  6. To record the payroll check, click Record Check.

You did it! You recorded a payroll check. Maybe it wasn’t all that much fun, but at least it wasn’t very difficult.

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