Paying Employees Using QuickBooks

There are three choices for your QuickBooks Payroll Options.  Below is a brief discussion of each:

  • Basic Payroll (Do it Yourself) – This service offers basic payroll runs.  It will calculate your taxes for you but will not provide or fill your forms or do any filing for you.  This service would be only for those businesses with less than 5 employees with very simple payroll processing needs.  You will need to keep up with certain tax thresholds such as state and federal unemployment taxes, where these taxes only apply to certain levels of gross wages.  You will have to manually prepare your tax filings for the state and IRS.  Direct deposit is available at no additional cost.
  • Enhanced Payroll (Do It Yourself) – This service is the recommendation for most small businesses that do not mind retaining the liability to file and pay the payroll taxes on time.  The Enhanced Payroll level will keep you updated on payroll tax laws at both the state and federal level, and will track all payroll taxes in your company after each payroll run.  This level is great for small businesses with more than 5 employees, and can handle more complicated payroll processing needs.  Enhanced will automatically fill in your tax forms for you, and offers options to e-file and e-pay your taxes (once you set up those accounts with the governing agencies). Direct deposit is also available for free.
  • Full Service Payroll (They Do It For You) – The Full Service Payroll option is much like when you outsource your payroll to ADP or Paychex.  This the least flexible of the payroll options and does not offer job costing possibilities.  You simply enter the pertinent payroll information and click to send it to Intuit, and they do the rest.  A journal entry is provided for your QuickBooks file to maintain the payroll expenses and cash debits in your accounts.

From a bookkeeping standpoint, the Enhanced Payroll option is the one to choose.  This level allows you to maintain the flexibility in the entire QuickBooks file while QuickBooks handles all of the tax adjustments and tax tracking behind the scenes.  Tax forms, filings, and payments are simple at this level as well.  The cost is very reasonable, and saves over outsourcing.  The Enhanced Payroll level offers best of both worlds.

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