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Set up, change, or delete employee-paid payroll deductions

by Intuit•53• Updated a day 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 paychecks 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 paycheck 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.

Set up a new deduction item

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. 

To set up specific deduction items like insurance, HSA, FSA, retirement, garnishments, or advances:

To set up other general deduction items, select your product below.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Follow this link to complete the steps in product Open this link in a new window

  1. Select your employee.
  2. From Deductions & contributions, select Start or Edit.
  3. From the Deduction/contribution ▼ dropdown, select + Add deduction/contribution.
  4. From Deduction/contribution type, select Other Deduction. If you need to set up a pre-tax item that isn't listed like commuter benefits, AFLAC Accident or Cancer, etc, select Health Insurance.
  5. From Type, select Other after tax deductions. If you need to set up a pre-tax item that isn’t like commuter benefits, AFLAC Accident or Cancer, etc, select Vision Insurance. Then after Step 7, select Pre-tax insurance premium.
  6. Add a Description. This is the deduction or plan name. Appears on paychecks. 
  7. Select how your deduction is calculated. Then enter the amount or percentage. 
  8. Select Save, then Done.
  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 paychecks.
  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.

Check out this video starting at 3:42 to see how to set up employee deductions.

The QuickBooks design has been updated! If this video doesn't match what you see in QuickBooks, use the in-app Search bar to navigate to the page you need.

Quickly add employees to your payroll and make managing your team easier with QuickBooks Payroll.

Step 1: Set up the deduction item

  1. Go to Lists, then Payroll Item List.
  2. Select Payroll Item ▼ dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Deduction, then Next.
  5. Enter the name of the deduction, and select Next.
  6. If applicable, select the name of the plan administrator (or add it),  and the account number. Then select Next.
  7. Select the applicable Tax tracking type. Select None if the deduction is after-tax. 
  8. Select Next three times.
    • For None tax tracking type, select net pay in the Gross vs. net window, then Next.
  9. 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.
  10. Select Finish.
  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 Center.
  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.

Follow this link to complete the steps in product Open this link in a new window

  1. Select your employee.
  2. From Deductions & contributions, select Start or Edit.
  3. Select Edit ✎ next to the deduction you want to modify.
  4. Edit the information as needed.
  5. Select Save, then Done.
  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 Center.
  2. Select your employee.
  3. Select Payroll Info.
  4. Change the amount or limit.
  5. Select OK.

Delete a payroll deduction item

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

Follow this link to complete the steps in product Open this link in a new window

  1. Select your employee.
  2. From Deductions & contributions, select Start or Edit.
  3. Select the trash bin icon next to the deduction you want to remove.
  4. Select Delete, then Done.
  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 paychecks, 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 on a message, Are you sure you want to delete this payroll item?
  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.

Follow this link to complete the steps in product Open this link in a new window

  1. Select your employee.
  2. From Deductions & contributions, select Start or Edit.
  3. Select + Add deduction/contribution.
  4. Select the item you want to change.
  5. Select Make inactive or Make active.
  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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