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10 Payroll Processing Timesavers

By checking some details now and updating tax rates throughout the year, you can save yourself time at year-end. As the year progresses, here are some handy tips:

  1. Turn on Automatic Updates for payroll
  2. Take advantage of Payroll Preferences
  3. Verify employees' information
  4. Assign employee withholding and unemployment insurance to the correct state
  5. Enter your state account numbers on the appropriate payroll item
  6. Update your SUI and SDI rates in QuickBooks when your state sends you new rates
  7. Use the Pay Liabilities window to pay your payroll taxes and other liabilities
  8. Run a test Form W-2 now
  9. Configure your system to allow QuickBooks to download updates
  10. Make sure your subscription account information is current
1. Turn on Automatic Updates for Payroll
Turning on Automatic Updates tells QuickBooks to check for new payroll updates automatically. This is the easiest way to help ensure that you always have the latest updates. If you don't turn on Automatic Updates, make sure to check for new updates when QuickBooks prompts you to. QuickBooks Payroll releases payroll updates as much as 12 times in a year—and sometimes more—because federal and state governments can and do make changes to their tax laws, rates, and forms at any time during the year. Since the actual number and dates of payroll updates vary depending on federal and state actions, we recommend that you connect to the payroll service each time you pay your employees (or at least every 45 days) to help ensure that you have the most current tax table available.

To learn about the latest payroll update, go to www.quickbooks.com/payrollnews. For instructions about updating your software and enabling or disabling Automatic Updates, see the Knowledge Base article "Downloading an update for QuickBooks."

Note: Internet connectivity issues can sometimes create difficulties with Automatic Updates, so users choose to turn them off. Learn how to solve these issues in tip 9.

2. Take Advantage of Payroll Preferences
Setting payroll preferences can streamline your payroll activities and give you the flexibility to display information the way you want to see it. For example, you can do everything from deciding whether to list employees in the Employee List by first name or last name to hiding Social Security numbers in headers on reports to renaming "Sick" or "Vacation" so that they appear on paystubs as something else, like "Paid Time Off."

From the Edit menu, choose Preferences. Select Payroll & Employees from the list on the left, then click the Company Preferences tab. See "Setting preferences for payroll" in QuickBooks Help for more information.

3. Verify Employees' Information
Early in the year, double-check that you have your employees' correct Social Security numbers and legal names. If information is incorrect, employees may not receive proper credit for earnings, which can affect future eligibility for and/or amounts of money paid through Social Security programs. Also, the IRS can penalize employers $50 for each incorrect W-2 filed, and the IRS can charge additional fees for filing incorrect reports.

To help you perform this review, you can generate a list of all your employees and their Social Security numbers. From the Reports menu, choose Employees & Payroll, then Employee Contact List. Modify the report as necessary to include the specific employees you want to review. If you decide you need to edit an employee's information, from the Employees menu, choose Employee List. Double-click the employee's name. Edit the appropriate fields, then click OK.

4. Assign Employee Withholding and Unemployment Insurance to the Correct State
When an employee lives and works in different states, you must make sure that you have assigned the correct states to the employee's withholding taxes and unemployment insurance. That way QuickBooks will calculate the correct taxes and withholdings, and you will make the correct payments to the right states. Regulations about which state to pay vary by state, so check with your accountant or tax advisor to find out where your employee should pay taxes.

To assign states for an employee's withholdings and unemployment insurance taxes:

  1. From the Employees menu, choose Employee List. If the employee is already on the list, select the employee's name and choose Edit from the Employee menu button. If the employee is not yet on the list, choose New from the Employee menu button.
  2. From the Change tabs drop-down list, select Payroll and Compensation Info.
  3. In the Payroll Info tab, click the Taxes button, then click the State tab.
  4. In the State Worked section, choose the state where the employee works from the State drop-down list. (Check with your accountant or tax advisor to find out which state to choose here.)
  5. Depending on the state you select, QuickBooks displays the SUI and SDI checkboxes.
  6. If the employee is subject to state unemployment insurance, either paid by the company or withheld from the employee's paycheck, select the SUI checkbox. If your state has state disability insurance and the employee is subject to it, select the SDI checkbox.
  7. In the State Subject to Withholding section, choose the state where the employee is subject to state withholding from the State drop-down list. (Check with your accountant or tax advisor for this information.) Choose a state even if that state doesn't have withholding.
  8. Enter the filing status and other information from the state withholding form the employee gave you.
  9. Do one of the following:
    • To continue entering tax information, click either the Federal or the Other tab.
    • If you have no more tax information to enter, click OK to return to the New or Edit Employee window.
5. Enter Your State Account Numbers on the Appropriate Payroll Item
If you subscribe to Enhanced Payroll (QuickBooks 2005 only), make sure you enter your state account numbers on the appropriate payroll item. Otherwise, these numbers won't appear automatically in the state payroll tax forms you prepare in QuickBooks. To edit a state reporting number:

  1. From the Lists menu, choose Payroll Item List.
  2. Select the payroll item you use for the particular state.
  3. Click the Payroll Item button.
  4. Choose Edit.
  5. Click Next until you reach the screen that displays the Enter the number that identifies you to agency field.
  6. Edit your state account number in that field. Double-check to make sure you entered the number correctly. If you mistype it and it appears incorrectly on your state tax form, your state might not give you credit for your payments.
  7. Click Next until the last screen, then click Finish.
6. Update Your SUI and SDI Rates in QuickBooks When Your State Sends You New Rates
Employers must update their state unemployment insurance (SUI) rates themselves. QuickBooks Payroll does not include updates to these rates because states assign each employer a unique rate. Employers located in one of the nine states that have state disability insurance (SDI) must also update their SDI rates themselves. Most states update their rates only at the beginning of each year, but if you're in a state that changes rates throughout the year (such as New Jersey), remember to update the rate when you get your state notice.

To update your SUI or SDI rates in QuickBooks:
  1. From the Employees menu, choose Payroll Item List.
  2. Double-click the SUI or SDI item you want to change.
  3. Click Next until you reach the window that displays your current-year rates.
  4. Edit your rate or rates (enter this in percentage form, like 4% and not .04).
  5. Click Next until you reach the window that displays a Finish button and click Finish.
7. Use the Pay Liabilities Window to Pay Your Payroll Taxes and Other Liabilities
To pay your payroll taxes and other payroll liabilities, you should use the Pay Liabilities window (not the Write Checks window). QuickBooks uses the Payroll Liability Checks you create in the Pay Liabilities window to keep track of your tax payments and payments of other liabilities and to generate your reports and tax forms. If you use the Pay Liabilities window, QuickBooks will also know how much you owe—otherwise, the program will not display the correct amounts when you run reports and prepare tax forms.

To access the Pay Liabilities window, from the Employees menu, choose Process Payroll Liabilities, and then Pay Payroll Liabilities. If you have previously used Write Checks to pay payroll taxes or other payroll liabilities, you may find some liabilities will need to be adjusted. See "Paying payroll liabilities" in QuickBooks Help and the Knowledge Base article Paying payroll taxes and other liabilities for more information.

8. Run a Test Form W-2 Now
Running a test Form W-2 on blank paper now can help you verify that your payroll items are set up correctly and that they are having the correct impact on your taxes. By performing this task early in the year, you can make any necessary adjustments to help ensure that filing W-2 forms at year-end proceeds smoothly. To learn more about preparing W-2 forms, see the article Filing Year-End Forms: Preparing Your Forms W-2 and W-3 from the January issue of the QuickBooks Payroll Bulletin.

9. Configure Your System to Allow QuickBooks to Download Updates
If you're having trouble downloading payroll updates, one of the most common reasons is the configuration of other systems on your computer that restrict your computer's interaction with the Internet, such as firewalls, antivirus software, pop-up blockers, and anti-spyware programs. The following Knowledge Base articles provide troubleshooting tips about Internet connectivity issues and configuration problems that can cause errors during the update process: If you are running a firewall on your network or PC, the firewall must be configured to provide access for your updates. The following Knowledge Base articles provide information on some of the more popular firewalls: 10. Make Sure Your Subscription Account Information Is Current
To keep your payroll subscription from lapsing, Intuit needs your correct account information—including e-mail address, street address, and payment information. To verify your payroll account information and update it if necessary, follow the instructions below.

Note: To perform these tasks, you must be connected to the Internet.

QuickBooks 2005
  1. From the QuickBooks Employees menu, choose Payroll Services and then choose View/Change Payroll Service Account Information.
  2. In the Update Information section, click Edit.
  3. Follow the on-screen prompts to view and edit the necessary information.
QuickBooks 2004 and 2003
  1. From the QuickBooks Employees menu, choose Payroll Services and then choose View/Change Payroll Service Account Information.
  2. Read the Update QuickBooks Payroll Account Information page, select the appropriate subscriptions at the top of the page, and then click Continue.
  3. On the Update Payroll Account Information page, review and change the billing and credit card information as necessary and then click Continue.
  4. On the Update Company Information page, review and change your company information as necessary, and then click Continue.
  5. On the Update Contact Information page, review and change your contact information as necessary, and then click Continue.
  6. On the Review Your Information page, verify the changes you made, and then click Update.
  7. Review and print the Confirmation page, and then click Done.


The information contained in the QuickBooks Payroll Bulletin is meant to provide general information about the payroll process and is not intended to provide tax or legal advice. Always consult your tax professional when preparing tax documents.