Top 5 Year End Questions: Paying/Filing Taxes

This time of year, accountants are superheroes in the tax world. While many of you use their expertise, we know there are others who do this on their own.  Whether you have help or not, this Top 5 is focused on paying those taxes.

1. Can I have volunteers listed as employees and not have an issue with payroll (or taxes)?

Yes, you can set these volunteers as your employees without affecting your payroll or taxes. As long as you don't run payroll for them, there will be no issues with your payroll.

Here’s what you need to do to add your volunteers to QuickBooks Online:

1. Go to Payroll and choose Employees.
2. Click Add an employee.
3. Fill in the necessary information.
4. Click Done.

Take a look at other tips for adding users: Add or edit an employee in Online Payroll.

2. How do I add $100 of taxable income to a payroll check without paying the employee?

To accomplish this, you can create a zero net check. This makes sure that all $100 goes toward income tax. Other reasons you may do this are to:

• Put an entire paycheck into a retirement plan. 
• Record a gift made to an employee, such as cash or a gift card.

First, you’ll need to add another earning pay type to the employee's profile, then use the net-to-gross formula to determine the gross pay amount. Once everything is all set, you can follow these steps:

1. Go to the Payroll menu, then select the Employees tab.  
2. Click the Run payroll button.
3. Choose the employee and pay schedule.
4. In the Other earning box, enter the amount determined by using the net-to-gross formula.
5. Select the Preview payroll button.
6. Click the Edit icon beside the Net pay amount.
7. Zero out all unwanted deductions
8. Edit the Federal Income tax or State Income tax amount, then click OK.
9. Select Preview Payroll, then select Submit payroll.

After that, run the Payroll Summary by Employee report. This will give you comprehensive details about your employee's wages, deductions, and tax info. Just go to the Payroll section from the Reports menu's Standard tab.

3. How do I add prior tax payments?

If you paid taxes in another software, etc, you can add that information into your QuickBooks account.

To record your tax payment:

1. Select Taxes, then Payroll Tax.
2. Select the Payments tab.
3. Review the payments listed and locate the tax you want to record a payment for.
4. If the payment is listed, choose the option Mark as paid then select Yes, mark paid. Note: This will be a non-posting transaction. It won't affect the bank register, but it'll clear the taxes from showing due and record the deposits.

If the payment isn't listed, continue with the steps below

1. Select Prior tax history.
2. Choose Add Payment.
   Reminder: This will be a non-posting transaction. It won't affect the bank register, but   clear the taxes from showing due and record the deposits.
3. Select tax type and liability period (the period that the taxes were accrued) then enter:
• Payment Date
• Check Number (optional)
• Notes (optional)
• Tax Item Amounts
4. Select OK. You'll then be back to the Prior Tax Payments screen.

More details on this process are in this article: Recording prior tax payments. You'll find steps for QuickBooks Online Payroll Enhanced, Intuit Online Payroll, and for QuickBooks Online Payroll Core, Premium, as well as Elite. 

4. How do I make sure taxes are correct with an employee that lives in a different state?

QuickBooks generates payroll taxes and forms based on the employee's residence. Some states have reciprocity agreements that may require you to pay and file for each one. You’ll want to make sure the employee’s address reflects the state of your employee's address.  You can do this through the Payroll menu.

Here's how:

1. Click Payroll from the sidebar menu.
2. Select the Employees section.
3. Choose the name of the employee.
4. Under ‘What are [Employee's name] withholdings?’ section, click the Pencil icon.
5. Update your employee's address. 
6. Click Done.

This way, when you run payroll with the employee's updated address, the program will generate taxes for that state.

5. Are convenience fees taxable?

If the customer is paying the fee, it's taxable income. You'll have to create an income account and a service item for your convenience fee. Then, add it as a new line item to your transaction to make it taxable. Here’s what you’ll do:

1. Click Accounting, then Chart of Accounts.
2. Click New. Then, choose Income under Account Type.
3. Choose Service/Fee Income under Detail Type. Then, enter a Name.
4. Click Save and Close.

After that, create a service item following these steps:

1. Click the Gear icon, then Products and Services.
2. Select New, then click Service.
3. Enter the product/service information and choose the Income Account you created.
4. Choose Save and close.

Once done, add the service item as a new line item to your transaction:

1. In your invoice, click the convenience fee item.
2. Enter the Amount, and make sure to mark the Tax column.
3. Select Save and close.

Here’s a great article to read more about recording processing fees in QuickBooks Online: Choose where to record payments and processing fees for QuickBooks Payments.

All good things must come to an end, but I hope this article was helpful and maybe showed you something you didn’t know. Stay strong, Community!