Entering Employee Commissions

CaroD213 · ‎March 31, 2019

Do I pay employer FICA taxes on commissions paid? It's extra added to a w-2 (hourly) employee on # of items sold. I read somewhere about just withholding a (22 25%?) flat federal withholding. Is that correct? Is so, this would be a separate check right? How would I set that up to withholding a flat tax on the amount without FICA taxes? Thank you.

Anonymous · ‎April 01, 2019

Hello CaroD213,

There are two ways on how to record commission pay.

The first one is to include it on the employee's regular paycheck. Taxes calculated will be based according to the normal federal and state withholding.

Another one is to create a separate commission paycheck. If the employee receive is outside the regular paycheck, then it becomes a supplemental wage. It will taxed at a rate of 22% and subject to FICA. Please see section 7. Supplemental Wages in Publication 15 2019 for more example on how taxes are calculated.

With that being said, QuickBooks automatically calculates the taxes for you. For now, you'll need to set up a payroll item for commissions. Here's how:

In QuickBooks Desktop, click Lists and choose Payroll Item List.
At the bottom left of the Payroll Item List, click the Payroll Item drop-down button, and choose New.
Select Custom Setup and click Next.
In Payroll item type choose Wage. Click Next.
From the Wages list, choose Commission. Click Next.
Enter the Item Name which prints on payroll checks and reports. Click Next.
Enter an Expense Account. Click Next.
In the Default Rate window, enter an amount or percentage to calculate this commission.
Click Finish.

If you have any questions, please let us know.

View solution in original post

Anonymous · ‎April 01, 2019

Hello CaroD213,

There are two ways on how to record commission pay.

The first one is to include it on the employee's regular paycheck. Taxes calculated will be based according to the normal federal and state withholding.

Another one is to create a separate commission paycheck. If the employee receive is outside the regular paycheck, then it becomes a supplemental wage. It will taxed at a rate of 22% and subject to FICA. Please see section 7. Supplemental Wages in Publication 15 2019 for more example on how taxes are calculated.

With that being said, QuickBooks automatically calculates the taxes for you. For now, you'll need to set up a payroll item for commissions. Here's how:

In QuickBooks Desktop, click Lists and choose Payroll Item List.
At the bottom left of the Payroll Item List, click the Payroll Item drop-down button, and choose New.
Select Custom Setup and click Next.
In Payroll item type choose Wage. Click Next.
From the Wages list, choose Commission. Click Next.
Enter the Item Name which prints on payroll checks and reports. Click Next.
Enter an Expense Account. Click Next.
In the Default Rate window, enter an amount or percentage to calculate this commission.
Click Finish.

If you have any questions, please let us know.

CaroD213 · ‎April 01, 2019

Thank you for pointing out the section in Publication 15. That cleared it up. Thank you.

FritzF · ‎April 01, 2019

Thanks for getting back to us, @CaroD213.

I'm happy to know that the article provided by my colleague helped you out. You can also check out these articles for future reference:

Let me thank you for being a part of our QuickBooks family. Please post again should you have any other questions or concerns. I'll be here to help. Take care and have a great rest of the week!

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Entering Employee Commissions