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Set up voluntary deductions in QuickBooks Payroll

by Intuit•2• Updated 2 weeks ago

Learn how to add deductions your employee needs to pay each payday in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

Payroll isn’t just about paycheques anymore. Sometimes employees need to pay for things like health insurance, retirement contributions, uniforms, tools, or dues. Maybe you gave your employee an advance on their paycheque and they need to pay it back. 

You can set up these benefits or deductions in QuickBooks Payroll. They’ll come out of your employee’s pay each payday.

QuickBooks Online Payroll only: See Manage your payroll items in QuickBooks Online Payroll to learn how to manage payroll items for multiple employees at once.

Voluntary payroll deductions are amounts subtracted from an employee's net pay to cover the cost of things such as employee-paid benefits offered by the employer, or general deductions like a charitable donation.

Note: Pre-tax deductions must come out of a taxable wage item. They will not deduct from a reimbursement type wage.

For deductions such as retirement plans and private health insurance, your provider can help you decide on the amount to be withheld and determine the taxability.

In this article, you'll learn how to:



Deduction vs Contribution

A deduction is an amount paid by an employee and deducted from each paycheque. A contribution is paid by the employer and often counts as additional pay or wages.

For example, an employee and an employer might pay some part of the cost for a health insurance plan. The employee-paid portion is called a deduction. The portion paid by the employer is called a contribution.



Learn about the types of voluntary deductions

Voluntary payroll deductions include medical, dental, and vision insurance premiums (both pre-tax and post-tax).

For the taxability of each deduction, see Supported pay types and deductions explained, for more details.

The chart below explains which deductions are supported in QuickBooks Online Payroll.

CategoryTypes
Health InsurancePrivate Health Care
Retirement PlansRRSP, RPP
Other DeductionsCash Advance Repayment, Loan Repayment, Charitable Donation, Union Dues, Other After-Tax Deductions


Set up a deduction item and assign it to employees

In QuickBooks Payroll, you can set up pre-tax or after-tax deduction items. If you aren’t sure how the deduction is taxed, talk to your plan administrator or an accountant. You can use the steps below to set up general deductions like uniforms, tools, commuter benefits, or miscellaneous. 

Add a deduction item for your employees. Once a deduction is set up for one employee, this deduction item appears as an option to select when adding a deduction to the rest of your employees.

To set up other general deduction items, see the section below.

Note: Not sure which payroll service you have? Here's how to find your payroll service.
  1. Go to Payroll and select Employees (Take me there).
  2. Select your employee.
  3. From Deductions & contributions, select Start or Edit.
  4. Select + Add deduction/contribution.
  5. Select an existing Deduction/contribution.
  6. Or, to add a new deduction:
    1. From Deduction/contribution, select + Add deduction/contribution.
    2. Select an appropriate option from Deduction/contribution type.
    3. Select an appropriate option from Type.
    4. Add a Description. This is the deduction or plan name, which appears on paycheques.
  7. Under the Employee deduction section, select how your deduction is calculated. Then enter the amount or percentage.
    Note: Do the same for Company contribution, if applicable.
  8. Select Save, then select Done.

Step 1: Set up the deduction item

  1. Go to Lists, then Payroll Item List.
  2. Select Payroll Item ▼ dropdown, then New.
  3. Select Deduction, then Next.
  4. Enter the name of the deduction, and select Next.
  5. In Agency for employee-paid liability, select a name from Enter name of agency to which liability is paid ▼ dropdown.
  6. Then Enter the number that identifies you to agency and select the Liability account from ▼ dropdown.
  7. Select Next.
  8. Select the applicable Tax tracking type. Select None if the deduction is after-tax. 
  9. Select Next three times.
    • For None tax tracking type, select net pay in the Gross vs. net window, then Next.
  10. Leave Default rate and limit fields blank unless these apply to all of your employees. You’ll add the rate and limit when the item is added to the employee profile.
  11. Select Finish.

Step 2: Add the item to the employee profile

  1. Select Employees, then Employee Centre.
  2. Select your employee.
  3. Select ✎, then select Payroll Info.
  4. From Additions, Deductions, and Company Contributions, add the deduction item.
  5. Enter the amount per period and a limit if applicable.
  6. Select OK.


Edit a payroll deduction item

If you want to change the employee’s deduction info such as amount, percentage, or its description, follow the steps for your product.

  1. Go to Payroll and select Employees (Take me there).
  2. Select your employee.
  3. From Deductions and contributions, select Edit.
  4. Select Edit ✎ next to the deduction you want to modify.
  5. Edit the information as needed.
  6. Select Save, then select Done.

If you need to change the payroll item itself:

  1. Go to Lists, then select Payroll Item List.
  2. Right-click the item and select Edit Payroll Item.
  3. Change the info as needed on each window.
  4. Select Finish.

If you need to change the deduction amount for your employee:

  1. Go to Employees, then select Employee Centre.
  2. Select your employee.
  3. Select Payroll Info.
  4. Change the amount or limit.
  5. Select OK.


Delete a payroll deduction item

Follow the steps for your product if you wish to remove a payroll deduction item.

You can delete a deduction from your employee. There isn't a "list" to remove deduction items from payroll completely.

  1. Go to Payroll and select Employees (Take me there).
  2. Select your employee.
  3. From Deductions & contributions, select Edit.
  4. Select Delete Trash can next to the deduction you want to remove.
  5. Select Delete, then select Done.

If the deduction wasn't used on paycheques, you can delete it from the payroll item list. If it was used, you can edit the item and rename it Do Not Use.

  1. Go to Lists. 
  2. Select Payroll Item List.
  3. Right-click the item and select Delete Payroll Item.
  4. Select OK.


Mark a payroll deduction item inactive or active

You can make a payroll deduction item inactive if no employees are assigned to it.

  1. Go to Payroll and select Employees (Take me there).
  2. Select your employee.
  3. From Deductions & contributions, select Start or Edit.
  4. Select View inactive items.
  5. Select the item you want to change.
  6. Select Make inactive or Make active.
  1. Go to Lists, then select Payroll Item List.
  2. Right-click the item and select Make Payroll Item Inactive or Make Payroll Item Active.
    • If you don’t see the option to Make Payroll Item Active make sure Include inactive is checked at the bottom of the list.

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