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PGrover
Level 2

Final check for a deceased employee in desktop version

We need to issue a final check for a deceased employee. We're not sure how to report the SS & Medicare wages and taxes only and then issuing the payment to the executor or trustee (when we get this information.) Has someone done this and if so, what steps do you take? We're using the desktop version of Enterprise, if that matters.

10 Comments 10
RhoiceW
QuickBooks Team

Final check for a deceased employee in desktop version

My condolences for your loss, Grover. I can guide you through issuing a final check for a deceased employee in QuickBooks Desktop Enterprise.

 

Before issuing a paycheck for your employee, you need to update their status first as Deceased in their employee profile in payroll.

 

Here's how:

 

  1. On the menu bar, click Employees then select Employee Center
  2. Double-click the name of the deceased employee to open their profile.
  3. Go to the Employment Info tab, and click Termination.
  4. Enter the Last day workedLast day on Benefits, and Last day on Payroll.
  5. Select Deceased and then click OK.

 

image.png

 

Once the status of the employee has been updated, you can proceed to create the final paycheck.

 

Here's how:

 

  1. From the Employees menu, select Pay Employees, then choose Termination Check.
  2. Review the Pay Period Ends date, Check date, and the Bank Account the payment comes from. 
  3. Place a checkmark next to the employees who need a termination paycheck.

 

Next, create the termination check:

 

  1. Under the Release Date column, select the Calendar icon, then choose the employee's release date or enter it manually.
  2. Enter and review the hours or salary.
  3. Select Open Paycheck Detail to review the paycheck details.
  4. If you wish to send the check via direct deposit, ensure you select the Use Direct Deposit checkbox. If issuing a paper check, leave this unchecked.
  5. If you don't want vacation or sick time to accrue for this specific paycheck, select the Do Not Accrue Sick/Vac checkbox.
  6. When you're done, select Save & Next to create a check for another employee, or select Save & Close to return to the Enter Payroll Information window.

 

To complete processing the paycheck:

 

  1. In the Enter Payroll Information window, select Continue.
  2. In the Make Employees Inactive window, choose whether to select Make Inactive to ensure the employee does not appear in payroll anymore, or select Keep as Active if needed.
  3. Review the amounts for each employee.
  4. Review the Check/Direct Deposit printing options.
  5. When you’re ready, select Create Paychecks.

 

Furthermore, you can refer to this article to detailed steps on how to create a final paycheck for your deceased employees in QBDT: Create final paychecks for terminated employees.

Additionally, I'd like to provide this article for you to be guided the step-by-step process of correcting employee overpayments by reducing future paychecks in QBDT.

 

I'm delighted to walk you through the essential steps of processing your final paycheck in QBDT. If you need further assistance with managing your employees, feel free to drop a reply. It's my goal to help you stay on top of your company's financials. Take care.

PGrover
Level 2

Final check for a deceased employee in desktop version

By marking the employee as deceased, does this let the system know that the wages are NOT taxable wages for Federal and State withholding? I don't want to find out later that my reporting is incorrect. I'd rather get it correct from the start.

 

Also, I know I have to establish a net $0 check in Payroll, only reflecting wages as taxable for SS & Medicare and withholding only those taxes. Do I establish a deduction for the balance of pay that will then be paid through AP and assigned as a 1099-Misc payment? 

Tori B
QuickBooks Team

Final check for a deceased employee in desktop version

Thanks for checking back with us, @PGrover.

 

Per the IRS website: 

 

"When an employee dies during the year, you must report the accrued wages, vacation pay, and other compensation paid after the date of death. If you made the payment in the same year the employee died, you must withhold social security and Medicare taxes on the payment and report them only as social security and Medicare wages on the employee's Form W-2 to ensure that proper social security and Medicare credit is received. On the Form W-2, show the payment as Social Security wages (box 3) and Medicare wages and tips (box 5) and the Social Security and Medicare taxes withheld in boxes 4 and 6; do not show the payment in box 1 of Form W-2.

If you made the payment after the year of death, do not report it on Form W-2, and do not withhold social security and Medicare taxes.

 

Whether the payment is made in the year of death or after the year of death, you must also report the payment to the estate or beneficiary on Form 1099-MISC."

 

For more information about handling tax forms, check out this IRS guide: IRS Instructions.

 

For extra guidance with your books, I recommend consulting with your accounting professional. Your accountant can review your accounts and advise the best way to handle the funds. If you don't have an accountant, you can always use the Find an Accountant tool from our Resource Center. 

 

Please don't hesitate to let me know if there is anything else I can assist you with. Take care! 

 

 

PGrover
Level 2

Final check for a deceased employee in desktop version

Thank you for trying to assist.

 

I understand the IRS rules to follow. I've done that research already. What I'm looking for is how Quickbooks will handle the payment. I need to know if QB will automatically mark the payment as NOT taxable for Federal and State withholding when the employee is marked "deceased". This isn't a standard termination, I've done those previously.

 

I'm also asking if I should set up a special deduction to assign the unpaid portion (after SS & Medicare is withheld) so it can then be paid through AP so it's tracked as a 1099-Misc payment? 

 

I cannot be the first and only person to have encountered this situation. I was hoping to find that guidance here.

 

I've contacted our CPA-who is a QB reseller. I was told by our CPA to reach out to our Payroll Administrator. Since I do payroll through QB, and am a small employer (16 employees) across two states, I don't have any other resources to try.

RogelioL
QuickBooks Team

Final check for a deceased employee in desktop version

I appreciate you for being proactive in this thread, @PGrover. Let me join this thread and address your questions about processing the final paycheck in QuickBooks Desktop.

 

To begin with, when you mark your employee as deceased, the paycheck will still be subject to federal and state withholding (Boxes 1, 2, and 17 on Form W-2) and also be liable for Social Security, Medicare, and FUTA (Boxes 3-6 on Form W-2).

 

Please note that the Deceased checkbox is for record-keeping purposes only. Thus, we'll have to configure your employee's tax profile as exempt manually:

 

  1. Go to the Employees menu, then Employee Center.
  2. Open the appropriate employee, then head to the Payroll info tab.
  3. Click Taxes, then select the Federal tab.
  4. Choose Exempt or Don't withhold from the Filing status drop-down menu.
    image.png
  5. Head to the State tab, then select Don't withhold from the Filing status drop-down menu.
    image (1).png
  6. Hit Save to confirm the changes.

 

As the estate or representative will receive a 1099-MISC, you can consider setting up and assigning a dedicated deduction item to that employee to allocate the unpaid portion after withholding Social Security and Medicare taxes.

 

Instead of using AP, you can choose a dedicated expense category for the deduction. Then, set the representative you've created as a 1099 vendor as the agency to which the liability is paid. For more guidance, it's best to reach out to your accountant or a tax advisor.

 

image (2).png

 

After that, we'll have to map that category to your 1099 MISC-Box 3. I've added a screenshot below for your visual reference:

image (3).png

Once everything is sorted out, you can now run the final paycheck. Make sure to enter the deduction as a negative amount to offset the net pay. Then, pay the liability and set the check date to 2024 so it will reflect on the 1099 MISC.

 

Finally, you may want to check out this article to learn how to generate a Payroll Summary Report to see what you've paid: Create a payroll summary report in QuickBooks.

 

Keep me posted if you run into more questions about the final payment for a deceased employee, @PGrover. We'll be here to provide more help.

PGrover
Level 2

Final check for a deceased employee in desktop version

Thank you for your assistance. One last question, where do I "click" on Deceased? I've attached a screenshot and this isn't an option. I've checked all other tabs for this employee and I cannot find anything where selecting deceased is an option.

AnneMariee
QuickBooks Team

Final check for a deceased employee in desktop version

You're almost there, PGrover. Just fill out the release date, and then you'll see the option to mark the employee as deceased.

 

The Release Date informs QuickBooks when to remove an employee from the Enter Payroll Information window. After entering it, the employee's name will no longer appear after that date. To mark an employee as deceased, fill out all fields in the Termination Dates section.

 

Here's a screenshot for your reference. Please take note that the dates in the screenshot below are just samples.

 

I'll also leave this article on creating final paychecks in QuickBooks for your reference: Create final paychecks for terminated employees.

 

For future use, here's a handy article on filing your taxes electronically with QuickBooks: E-file and e-pay federal forms and taxes in QuickBooks Desktop Payroll Enhanced.

 

Getting the newest tax table in QuickBooks Payroll is also important to stay compliant with paycheck calculations. Here's a guide on how to do so: Get the latest tax table update in QuickBooks Desktop Payroll.

 

Thanks for choosing QuickBooks Payroll for your business. I'm glad I helped you ensure accurate reporting by marking an employee as needed. If any more questions pop up or you need further assistance, please get in touch. I'm here to take your QuickBooks experience to the next level.

PGrover
Level 2

Final check for a deceased employee in desktop version

I see you had modified your response to include more information. Unfortunately, I didn't see it prior to running the final termination paycheck.

 

I'm not sure if this would have worked because the first paycheck issued on 1/1/25 did have wages that were taxable for all of the taxes. If I took the steps you added, would it have reflected ALL of the wages paid for the year as non-taxable??

 

I'm just going to have to modify all of my data when I'm reporting to the Federal and State of MN taxing authorities. I'll also have to make sure the 2025 W-2 and W-3 are correctly reported.

 

Thank you for trying to help me through this process. It certainly has been a struggle.

PGrover
Level 2

Final check for a deceased employee in desktop version

AnneMariee,

 

This did help me. Thank you!

ChristineJoieR
QuickBooks Team

Final check for a deceased employee in desktop version

Hello, PGrover.

 

I'm happy to hear that you were able to find the precise solution you needed from my colleague. Our main priority is to offer you the necessary keys and pointers that will assist and empower you to achieve your objectives and succeed in your endeavors.

 

Please in kind mind that we are still here to support you. If you have other  concern about your employee paycheck matter, let me know by adding a response below.

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