Outsourcing payroll is a popular practice among small and large businesses alike. It allows businesses to focus on their core operations while professionals handle the complex and time-consuming task of processing payroll. QuickBooks, a popular accounting software, is often used to manage payroll in-house. However, many businesses still want to use QuickBooks to record their outsourced payroll. In this article, we will explore how to record outsourced payroll in QuickBooks, step-by-step.
Understanding Outsourced Payroll
Before we dive into the details of how to record outsourced payroll in QuickBooks, it’s important to understand what outsourced payroll is and how it works. Outsourced payroll involves hiring a third-party service provider to handle your company’s payroll processing. The provider typically handles tasks such as calculating employee paychecks, withholding taxes, and submitting payroll tax deposits to the appropriate government agencies.
Benefits of Outsourced Payroll
Outsourcing payroll can offer several benefits to businesses. For example, it can save time and resources by streamlining payroll processing and reducing the need for in-house staff to manage these tasks. It can also improve accuracy and compliance with payroll tax regulations, as payroll service providers typically have expertise in this area.
Steps to Record Outsourced Payroll in QuickBooks
Step 1: Set up your payroll accounts
Before recording any payroll transactions, you need to set up your payroll accounts in QuickBooks. To do this, go to the Lists menu and select Chart of Accounts. Click on the New Account button and choose Payroll as the Account Type. Enter a name for the account, such as Outsourced Payroll or Payroll Service Expense. Click Save and Close.
Step 2: Record the payroll service fees
The first transaction you need to record is the payroll service fees charged by your outsourced payroll provider. This transaction represents the amount you paid your payroll service provider for their services. To record this transaction, go to the Banking menu and select Write Checks. In the Pay to the Order of field, enter the name of your payroll service provider. Enter the amount of the payroll service fees in the Amount field. In the Account field, select the Payroll Service Expense account you created in Step 1. Click Save and Close.
Step 3: Record the payroll liabilities
When you outsource your payroll, your payroll service provider will withhold and pay your payroll taxes on your behalf. To record these transactions in QuickBooks, go to the Employees menu and select Payroll Taxes and Liabilities. Select the Pay Scheduled Liabilities option and enter the liability amount for each tax category. Make sure to select the appropriate due date for each liability. Click the Review button to review the liability payments and click the Submit button to pay the liabilities.
Step 4: Record the payroll expenses
The last step is to record the payroll expenses. This transaction represents the amount you paid your employees, including their gross pay, taxes withheld, and any other deductions. To record this transaction, go to the Employees menu and select Pay Employees. Choose the appropriate pay period and select the employees you want to pay. Enter their hours worked and any other earnings or deductions. Make sure to select the appropriate payroll items for each transaction. Click Preview Paycheck to review the transactions and click Create Paychecks to finalize the payments.
Recording outsourced payroll in QuickBooks can be a complex process, but by following the steps outlined above, you can ensure that your payroll transactions are recorded accurately and efficiently. Remember to work closely with your payroll service provider or QuickBooks expert to ensure that you are in compliance with all relevant payroll and tax regulations, and keep detailed records of all payroll-related transactions for future reference. With these best practices in place, you can enjoy the benefits of outsourcing payroll while maintaining accurate financial records for your business.