I'm in the process of switching from biweekly payroll to semimonthly. The actual change is simple, but I was wondering what should be done about the "catchup" that I need to now pay my salaried employees.
We have yet to hit a month where three checks went out, so the overall payout from biweekly pay is much less than it would have been under semimonthly checks, so I owe my employees an extra payment to offset the difference. I was thinking of adding on a one-time benefit to the next pay period that catches them up to where they should be, but was not sure if this was the right way to do this (likely not as a bonus because those have different tax rates). What's the best way to achieve this in QBO?
Hi there, @Anonymous.
Good to see you in the Community. I can help share some insight about adding an extra payment to your employees' paychecks for the next pay period.
You can either create an additional paycheck for each employee to catch up for their current wage or enter a new other earnings item to their paychecks to get this straightened out. Other earnings are taxable payments to an employee that are separate from regular wages and used to calculate deductions.
If you prefer the latter, please refer to the steps below to set this up:
After that, you can add this pay type to your other employee's profile. Then, when you're ready to run payroll, just enter the extra payment in the new payroll item's field.
I've attached some articles about this for additional reference:
That should get you back on track. Stay in touch if you have any other questions about this process, or if you have any other questions about payroll. I'll be happy to help you out. Have a wonderful day.
@MaryGraceS thanks for the advice! This was the direction I was headed towards so I'm glad I got confirmation of that. Out of curiosity, if it were the reverse problem and I needed to reduce the amount paid on each check, would you recommend a new deduction type?
Dropping in to provide some insights, alex-pearce.
Yes, you'll want to create deduction item to reduce the amount.
Here's how to do it:
The Community is always here for you if you have other payroll questions. Feel free to post.
Thanks @ShiellaGraceA. Shouldn't I use a pre-tax deduction since I would have already paid the tax on the extra amount given in the prior checks? I wouldn't want to be double taxed on the difference between the older checks and the current ones.
Thank you for getting back to us, @alex-pearce.
You're right. You'll need to set up your deduction item as pre-tax. Let me provide some details.
Setting up your deduction item as Other after tax deduction means that your deductions are taken out from your employee's net pay. And setting it up as a Pre-tax deduction denotes that deductions are taken out from the gross pay.
Also, if you set up your deduction as pre-taxed, you won't be taxed twice on your paychecks.
You may follow the steps given by my colleague above in setting up a deduction.
Fill me in if you have any other concerns.
@Alessandra_B I don't see an option for a pre-tax deduction (see attached screenshot). I'm using QBO Simple Start & Enhanced Payroll
I'd be glad to help you further with your deductions, @alex-pearce.
Thank you for providing me with a screenshot.
There are several deductions which are pre-taxed in QuickBooks Online. Some of these deductions include:
This said, you can choose between these deductions as a payroll deduction for your employee.
Also, I recommend reaching out to your accountant about your deductions. This way, they can provide you with their insights on which pretax deductions to use.
You may refer to this article for more information: Supported Pay Types and Deductions Explained.
Feel free to leave a comment below if you have any other concerns.