We're using QB Desktop Pro 2020. We need to temporarily reduce our monthly salaries by a set dollar amount per employee. What is the best way to do this?
Can I create a Payroll Item with the type as "Salary Reduction" and Tax Tracking as "Compensation", then within the individual Paycheck Details use that line item and enter a negative dollar amount?
Or should the line item be "Deductions" and appear under "Deductions from Gross Pay"? Will taxes then properly calculate?
Hello @Kate M,
Yes, you can create a new payroll item as stated on the second line of your initial post. Doing so, it'll correctly post the reducing amount every time you create paychecks for your employee.
But I'd still recommend contacting your accountant for guidance as to how you create the payroll item. He/she can also provide the best solution needed so that your taxes is calculated correctly.
Lastly, here's an article you can read for ideas about how you can create an employee's paycheck: How do I create a paycheck for an employee?
If there's anything else that I can help you with, let me know in the comments. I'll be here to lend a hand.
Thank you - I'll give that a try.
I was talking with our CPA about it, but since he doesn't use QuickBooks he's a little hampered in giving specific QB guidance. He was able to guide me as far as not classifying it as a deduction which wouldn't work since a deduction is then paid out by the company (ex; shared life insurance premiums, etc.).
This suggestion did not work. Most likely because we use Annual Salary amounts for each of us which QB then divides by 12 months for the monthly payroll. Creating a "Salary Reduction" payroll item didn't work because it wouldn't allow me to enter a negative number (amount we decided for the reduction).
I voided the paychecks I had started, then tried reducing the annual salary amounts by 4 times the monthly amount we wanted to reduce our salaries (for Sept, Oct, Nov & Dec). Started generating the September paychecks again, and QB didn't reduce the monthly salaries the full amount we wanted - again because it divides the annual salary by 12. I can't even do a manual override within the paycheck. On the third try I just gave up and issued full paychecks.
Miscellaneous Deduction doesn't work either because the deduction is held in the Payroll Liabilities account to be paid out to a vendor.
QuickBooks is just not flexible enough for annual salaries. Very very frustrated!
Thanks for getting back to us about this payroll issue, @Kate M,
Handling a salary reduction in QuickBooks Desktop is quite tricky. If you need to update the employee's salary for a certain period, it requires updating the annual amount on the employees profile so it shows the correct amount.
Say for example, an employee gets $120,000 as his annual salary, then he should have $10,000 every month. To reduce this by a dollar amount every payroll run, change the annual rate to $119,988 (actual rate minus 12 months), so when you process the paycheck, it shows $9,999. After the reduction period no longer takes effect, restore the original rate so the taxes are accurate.
There is no need for you to set up another payroll item for the reduction, QuickBooks will automatically calculate the taxes based on the new gross wage on the paycheck. You only use deduction items if you made an overpayment to an employee. This article best explains this scenario: Reduce paycheck wages for an employee who has been overpaid
For your reference on how to edit an employees profile, see the following article: Update or delete employee info
Let me know if you have any questions or clarifications about this. I'll be more than glad to share some more insights to help you with your payroll processing. Just click the Reply button below to notify me.
I did edit & reduce each employee's annual salary amount by $1,000.00. What I was trying to do was reduce our monthly salaries by $250.00 each for the next 4 months (and possibly increasing the reduction to $500.00 if necessary). QB divided the adjusted annual salary for a 12 month period, which only reduced our gross salaries by $166.67 each per month, instead of calculating a $1,000 reduction for the remaining 4 months of the year - which is what I hoped it would do.
This approach just doesn't seem to work well for short-term reductions. There should be a simpler way to enter a reduction than manually calculating & editing each & every annual salary. The only thing I can think of is changing all of us over to a monthly salary (instead of annual salary, if that option is available) starting with January payroll.
Hello there, Kate M.
I do appreciate your time and effort in reducing your employee's payroll. While the option to switch to a monthly salary is unavailable, we'll have to adjust the salary manually. Hence, in the employee's payroll information, the salary is set annually.
Here are a few articles that will help you run payroll and look into your payroll reports:
I'm just here of there's anything else that you need help with. Take care!
Thanks for your suggestion, but as stated in previous postings I tried manually adjusting our annual salaries already. Those steps didn't produce the reduction amount that we need & I'm not going to waste time & effort adjusting & readjusting the salaries over & over and voiding multiple paychecks until I hit on the correct reduction amount.
Intuit needs to develop an easier solution for situations like this so stabs at manual adjustments aren't the only solution.
I am in a similar situation. I need to reduce a salaried employee's pay by a specific and differing amount each pay period. I decided to switch the employee over to an hourly employee and I calculated how much the employee would earn per hour for a 40 hour work week. That hourly rate is the base pay (equal to what she is paid as a salaried employee). Then I just reduce the 40 hours each week by the amount I need to deduct from the pay that week. Does that make sense? That's my plan anyway - I haven't tried it yet.