Paying Payroll Liabilities in QuickBooks 2016

By Stephen L. Nelson

QuickBooks knows you have payroll liabilities to pay. Make no mistake: Big Brother wants the money that you withhold from an employee’s payroll check for federal income taxes, Social Security, and Medicare. Big Brother also wants the payroll taxes you owe: the matching Social Security and Medicare taxes, federal unemployment taxes, and so on. So every so often, you need to pay Big Brother the amounts that you owe.

If you withhold money from employees’ checks for other reasons (perhaps for health insurance or retirement savings), these amounts are payroll liabilities that need to be paid to the appropriate parties.

Paying tax liabilities if you use a full-meal-deal payroll service

A quick clarification: If you’re using a full-meal-deal payroll service — something like the ADP or Paychex service — your federal tax liabilities and most (perhaps all) of your state tax liabilities are paid as part of the service. In other words, the payroll service withdraws money from your bank account and uses this money to pay the appropriate federal or state government agency.

Be sure to check which state payroll taxes QuickBooks calculates and pays. In Washington state, QuickBooks won’t calculate a couple of state payroll taxes, so you have to calculate these myself (on the state payroll tax form) and pay them with a check.

Paying tax liabilities if you don’t use the full-meal-deal payroll service

If you don’t use a full-meal-deal payroll service, you need to pay the payroll liabilities yourself. To do this, choose Employees → Payroll Taxes and Liabilities → Pay Scheduled Liabilities. When QuickBooks displays the Employee Center: Payroll Center window (and its list of scheduled payrolls and the associated liabilities), choose the payroll liability you want to pay and then click the View/Pay button.

QuickBooks writes the check and puts it in your register. QuickBooks also gives the check the appropriate date and schedules it to pop up in your reminders window at the right time. Also, if you’re enrolled in the EFTPS online — and you should be — the check is created the same way, and the check number can be changed to EFTPS and not actually printed.

When do you make payroll tax deposits? That question comes up frequently. The general rule about U.S. federal tax deposits is this: If your accumulated payroll taxes are less than $2,500 for the quarter, you can just pay those taxes with your quarterly 941 return.

This law is called the De Minimis rule. (My understanding is that the law was named after Congresswoman Dee Minimis.) If you owe more than $2,500, other special rules come into play that determine whether you pay deposits monthly, semimonthly, weekly, or even immediately. The IRS tells you, by the way, how often you’re supposed to make payments.

If you owe a large amount of money, you’re required to deposit it almost immediately. For example, if you owe $100,000 or more, you need to make the payroll tax deposit by the next banking day. Some nuances apply to these rules, so unless you don’t owe very much (and, therefore, can fall back on the De Minimis rule), you might want to consult a tax advisor (or call the IRS).

The general rule when processing payroll is to make the last payments that you process the ones that pay your federal and state tax deposits when they come due. You’ll never get into late-payment trouble if you follow this approach. It will also make your life a lot easier when it comes time to fill out Schedule B of Form 941, if you have to do so.

To make a payroll tax deposit, you need to sign up for the U.S. Treasury electronic funds transfer payment system at EFTPS.

Paying other nontax liabilities

If you’re paying nontax liabilities for things such as employee health insurance or retirement savings — it doesn’t matter whether you’re using the el cheapo payroll service or a full-meal-deal payroll service — you also choose Employees → Payroll Taxes and Liabilities → Create Custom Liability Payments. (When you choose that command, you’ll need to indicate which liabilities you want to pay.)

You need to pay all your payroll liabilities via Employees → Payroll Taxes and Liabilities → Create Custom Liability Payments if you want QuickBooks to keep your payroll liabilities straight. People commonly just pay these liabilities by using the Write Checks window. That creates a mess.