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Level 2

Handling payroll taxes for a construction company in Quickbook Desktop

Help! I need someone with construction accounting background and QBs. Ok, background...I'm a retired business teacher who taught high school students accounting. I somehow found my way to be working for a concrete construction company with the title of "accountant". I was unfamiliar with construction accounting, but I'm trying to learn it quickly. The company is in it's 26th year and has been using QuickBooks from almost the start. Our tax accountant is not well versed in Quickbooks, so I'm at a lost on how to handle certain situations. Issue #1 The company did not set up Quickbooks in the most advantageous way to handle construction accounting. So I'm having to correct, probably not the best word, I having to alter the way we have been doing accounting things for 25 years.  Sorry for the long intro... My current question/problem. We have not been tracking COGS, all expenses were just expenses. I'm currently bringing direct expenses into COGS sold. How do I account for direct payroll taxes? We have employees who work hours both directly on projects and non related projects in the same pay period and employees who don't directly work on projects...ex. my position. If I create a "Direct Payroll Taxes" account how would I separate out those who have no direct connection with projects? Sorry, this appears to be a stupid question to me, but I'm stumped. Thank you for any help. Remember I'm a newbie in construction accounting. 

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QuickBooks Team

Handling payroll taxes for a construction company in Quickbook Desktop

Thank you for visiting the Community today, LarryKetch.


I'm here to help make sure you can properly record your payroll taxes and projects. We'll have to utilize the Job Costing, Class and Item tracking for paycheck expenses to resolve your concerns.


To start off, you'll have to turn on the class tracking feature. Here's how: 


  1. Head to the Edit menu at the top and choose Preferences.
  2. Go to the Accounting menu on the left panel and select Company Preferences.
  3. In the Class section, tick the box for Use class tracking for transactions.
  4. Navigate to the Payroll & Employees on the left panel and select Company Preferences.
  5. Mark the box for Job Costing, Class, and Item tracking for paycheck expenses
  6. Select Entire paycheck or Earnings item.
  7. Click the OK button for the changes to take effect.


Next, set up a payroll item to account for expenses by job. I'm here to guide you through the process.


  1. Tap the Lists menu at the top bar and choose Payroll Item List.
  2. Click the Payroll Item ▼ dropdown and select New.
  3. Tick the Custom Setup radio button and press the Next button to continue.
  4. Select DeductionAddition, or Company Contribution, then Next.
  5. Enter the name of the item and mark the box for Track Expenses by Job.
  6. Select the information as needed on each window and press the Finish button.


When you create and run payroll, open your employees’ paycheck details and pick the job name from the Customer: job drop-down (Earnings item section). Then, add the hours or pay. I suggest consulting your accountant for advice on how to handle the matter, so your financial records are in order.


You'll have to run the Job Profitability Summary report to see the wages, taxes, deductions, and contributions.  From there, you'll be able to determine which project is profitable.


To open the statement: 


  1. Go to Reports, then Jobs, Time, & Mileage.
  2. Select Job Profitability Summary.
  3. Double-click the job amount to see the wages, taxes, deductions, and contributions on each job.


Regarding your direct payroll taxes, QuickBooks Desktop (QBDT) will automatically calculate the information when you create paychecks. Check out this reference for more details on how the program computes taxes: Understand how your payroll taxes are calculated. 


For a quick view of your payroll totals, including employee taxes and contributions, let's build the Payroll Summary report.  


Here are some handy resources that cover topics about job costing, class tracking, and building job-related reports:



To get acclimated to the features available in QBDT, feel free to utilize our video tutorials and self-help articles.


Feel free to visit us again if you need further assistance managing your taxes and projects. I'm always ready to assist you further. 

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