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How to Set Up a Basic Payroll in QuickBooks 2010

To set up do-it-yourself payroll in QuickBooks 2010, you step through a Web-based interview. With QuickBooks’ Basic Payroll option, you do the work. You need to understand federal and state payroll tax rules.

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1To start this interview, choose Employees→Payroll→Order Payroll Service.

QuickBooks displays the Intuit QuickBooks Payroll page. As this Web page indicates, to set up QuickBooks payroll, the first step is choosing a payroll option.

2Click the Learn More button beneath the Two Do-It-Yourself Payroll Solutions image (which is a link).

A second payroll setup Web page appears.

3Click the Basic Payroll tab, and then mark either the Up to 3 Employees button or the Unlimited Employees button.

This tab lets you indicate how many employees you’ll need to prepare payroll for.

4Click the Basic Payroll’s Buy Now button.

A Review Your Order Web page appears. After you click Continue, the Company Information window appears.

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5Fill in the series of Web page forms that appears, clicking Continue after completing each page.

Note that purchasing the payroll service itself is a one-time step.

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6Choose Employees→Employee Center and click the New Employee button.

QuickBooks displays the New Employee dialog box.

7To describe an employee, complete the fields supplied on the Personal tab.

All this stuff is self-explanatory; you enter the person’s first name into the First Name text box, the person’s middle initial goes into the M.I. text box, and so forth.

8(Optional) If you want to collect and store additional information for an employee (such as his or her Billing Rate Level), click the Additional Info tab.

This tab provides a Define Field button that you can use to collect custom bits of information about an employee.

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9Select Payroll and Compensation Info from the Change Tabs drop-down list.

Use the Payroll and Compensation Info tab to describe how an employee’s salary or wages are calculated.

10Enter the payroll item in the Earnings list box.

For example, if an employee earns an annual salary of $30,000, you enter the salary payroll item into the Item Name column. Then you enter the annual salary of $30,000 into the Hourly/Annual Rate column. Click Add New if salary doesn’t already appear on the list.

11From the Pay Frequency drop-down list, select the pay period.

QuickBooks also requires you to choose a Pay Schedule.

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12To describe which taxes an employee pays, click the Taxes button.

QuickBooks displays the Taxes dialog box.

13In the Federal tab, identify the employee’s filing status, number of allowances claimed, and any extra withholding specified.

In addition, use the Subject To check boxes to indicate whether this employee is subject to Medicare, Social Security, or federal unemployment tax, or if the employee is eligible for an earned income credit.

14Select the State tab and describe your state taxes.

The State tax tab varies depending on the state you’re in.

15Select the Other tab, and then describe and store any local tax information, such as a city income tax.

The Other tab allows you to add other taxes that apply to your locality, if needed.

16Click OK.

The New Employee dialog box reappears.

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17(Optional) Click the Sick/Vacation button.

The Sick and Vacation dialog box appears. This dialog box lets you specify how sick or vacation pay, or personal leave time, is accrued payroll period by payroll period.

18In the Hours Available As Of text boxes, enter the number of sick or vacation leave hours the employee has.

This text box appears in both the Sick section and the Vacation section.

19(Optional) In the Accrual Period drop-down lists, select how often sick or vacation pay should be accrued.

If sick or vacation pay is accrued, enter how many hours of sick time and vacation time an employee earns each paycheck, hour, or at the beginning of the year in the Hour Accrued Per text box.

20If you've set a maximum number of sick hours or vacation hours that an employee can accumulate, enter this value into the Maximum Number of Hours text boxes.

If you haven’t set a maximum for either sick of vacation hours, you may be the best boss ever!

21If you want to reset the sick hours and vacation hours to zero at the beginning of each year, select the Reset Hours Each New Year? check box.

If you leave it unchecked, the hours roll over into the following year’s sick and vacation time.

22Click OK.

The New Employee dialog box pops up once again. The Payroll Info tab should be visible.

23If you use the Direct Deposit option, click the Direct Deposit button on the Payroll Info tab.

QuickBooks then prompts you to supply the direct deposit information necessary to directly deposit checks for employees. Click OK. You’re back at the New Employee dialog box.

24Select the Employment Info option from the Change Tabs drop-down list.

The Employment tab appears.

25Enter bits of employment data in the fields that appear in this tab.

For example, you can enter the hire date. Down the road, you can use the Release Date to record the date that the employee leaves the company. After you enter all the relevant information, click OK.

You’re returned to the Employee Center, which you can close, or you can click New Employee to add another employee.