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How to Do Payroll with Quicken 2013 or 2014

To do payroll in Quicken 2013 or 2014, you need to set up a couple of payroll expense categories. Fortunately, doing so is not particularly difficult. This information is specific to setting up U.S. federal income and payroll taxes.

If you employ people in a state that has a state income tax — California, say — you may also have to deal with state payroll taxes. But you can track and process these the same way you process the federal taxes. (Some counties and cities even have income taxes, but these should also work the same way.)

Set up the wages expense category

You need to set up a payroll expense category for tracking the wages you pay employees:

  1. Choose Tools→Category List.

    Quicken, with no hesitation, displays the Category List window.

  2. Click the New button.

    Quicken displays the Set Up Category dialog box.

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  3. Enter Wages as the category name by moving the cursor to the Category Name text box and typing Wages.

    If you told Quicken during the setup that you’ll use Quicken to track a business, Quicken may have automatically set up the Wages category.

  4. (Optional) Enter a description of the category.

    If you want, you can type a description in the Description text box.

  5. Select the Expense option button.

    This choice tells Quicken that you’re setting up an expense category.

  6. (Optional) Describe the tax characteristics of this category.

    To further describe taxable income and tax deduction categories, click the Tax Reporting tab and then select the Tax-Related check box.

  7. Click OK.

    Quicken adds the category to the category list and redisplays the Category List window.

Set up the payroll tax expense category

You also need to set 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).

Request 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.

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

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, 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.

Pay someone for a job well done

After you set up the two needed expense categories within Quicken and after you collect the necessary tax information, you’re ready to pay someone.

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. Is Betty’s salary $400 per week? Then you owe her $400 for the week.

Calculate that deductions stuff

Your next step — after you know how much you’re supposed to pay Raoul and Betty — is to figure out what Uncle Sam says you must withhold.

To determine this amount, you need both Raoul’s and Betty’s W-4s to find out their 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.

Fictional Betty’s pay is $400 per week. If Betty’s filing status is married, she is filing jointly, and has three personal exemptions, you’d need to need to flip to the page in the Circular E that shows withholding amounts for a married person filing a joint return when the person claims three withholding allowances.

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.

Figure out someone’s net wages

The table summarizes the payroll calculations based on the examples.

Payroll for Raoul and Betty
Item Raoul Betty Explanation
Gross Wages $600 $400 Their pay
Withholding $79 $18 From Circular E
Social Security $37.20 $24.80 6.2% of gross wages
Medicare $8.70 $5.80 1.45% of gross wages
Net Wages $475.10 $351.40 What’s left over

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.

In general, you treat other taxes and the amounts the employee pays similarly.

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.

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

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