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Using QuickBooks with an outsourced payroll service

If you plan to use an outsourced payroll service, we recommend that you DO NOT set up payroll in QuickBooks. Instead, we recommend setting up your company file in the following ways:

  • Add your employees to the Employee list. Go to the Employees menu and click Employee Center, then click the Employees tab.

  • Decide how much payroll detail you want to track in QuickBooks so that your profit & loss statement and balance sheet have the information you need.

  • Set up an expense account for payroll expenses and sub accounts for each type of payroll expense.

    For example, suppose you need to track expenses for gross wages, company-paid taxes, and company-paid benefits. You would set up a sub account for each of these expenses.

  • Set up an Other Current Liability account for all employee-paid deductions that are paid later, whether they are taxes or benefits.

  • When you receive information from the payroll service, enter employee paychecks in the Write Checks window.

    On the Expenses tab, enter the gross wages on the first line and the deductions (with a minus sign) on the next line. Assign your Payroll Liabilities account as the account for the deductions.

  • When you enter a payment of taxes or benefits, use the Write Checks window.

  • Assign an expense account for the portion of the payment that is a company expense. Enter a separate line for the portion that the employees paid for as deductions. Use your Payroll Liabilities account for the deductions.

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