Setting Up Payroll Deductions

Employers deduct a variety of amounts from employee pay. In addition to payroll taxes, there can be deductions for contributions to a disability plan, health insurance plan, 401(k) plan, fundraising organization such as United Way, cafeteria benefit plan, and more. The process for setting up each of these items is similar. For this example, we'll look at the procedure for setting up a payroll deduction for contributions to a 401(k) plan.

Set Up Payroll Deductions

Select Payroll Item List from the Lists menu.

TIMESAVER

You could also click the Payroll Items icon in the Payroll Center.

Click the Payroll Item button and select New, or press Ctrl+N.

Check the circle next to Deduction (Union Dues, 401(k) deferral, Simple IRA).

Click Next.

Enter a name that you will use to refer to this deduction in your paychecks and payroll reports.

Click Next.

Enter the name of the agency or company to whom you pay this liability.

Enter the account number this agency or company has assigned to you.

Enter the account you use to track this liability.

Click Next.

Choose the tax classification for the payroll item. In this example, I've chosen 401(k) for the item.

Click Next.

Check which taxes should be computed after the payroll item has been deducted from income.

Click Next.

Indicate if the calculation for this payroll item is calculated based on a quantity or the number of hours worked or neither.

Click Next.

Enter default amount or percent for this payroll item that applies to all employees. For example, if the same amount or percent were applied to all employees, you would enter that here. If the amount of this payroll item is calculated individually by employee, leave the default blank.

Enter an upper limit for this payroll item if you want QuickBooks to give you an alert if the limit has been reached.

Click Finish.