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Intuit

Create final paychecks for terminated employees

Learn when and how to create final paychecks in QuickBooks and Intuit Payroll products.

Letting an employee go is challenging. When an employee no longer works for you, you need to give them their final paycheck to cover their remaining wages.

Here's how to create final employee paycheck in each payroll product. We'll also offer some guidance if you're not sure how to handle severance.

Step 1: Learn the difference between termination and severance

Final paycheck (for termination)

If you terminate an employee for any reason, including discharge, layoff, or resignation, you must pay them for all time owed.

How and what you pay depends on the agreement you have with your employees. You also need to be compliant with state and federal tax laws. Reach out to your state agency for more info about your state's legal and tax requirements.

Severance paycheck

Severance pay is a payment package offered to employees based on length of service and salary requirements. There are no requirements in the Fair Labor Standards Act (FLSA) for severance pay. Reach out to your state agency for more info about your state's legal and tax requirements.

Severance payments are subject to regular federal taxes. You can pay severance as a regular, unscheduled, or bonus/ commission paycheck. If you pay severance pay as a bonus or commission, you must use the supplemental withholding tax rates.

You can also create a severance paycheck using a severance pay earning type. If you have QuickBooks Online Payroll or Intuit Online Payroll, here's how to add or change pay types in Online Payroll. If you have QuickBooks Desktop Payroll, here's how to create a bonus payroll item in QuickBooks Desktop Payroll.

Sick or vacation time

The Fair Labor Standards Act (FLSA) doesn't require payment for time not worked, such as vacation, sick leave, or federal or other holidays. However, your state might. Reach out to your state agency for more info about your state's legal and tax requirements.

Step 2: Create a final paycheck

Follow the steps to create your employee's final paycheck in the payroll product you use.

In QuickBooks Online Payroll, you can create a scheduled or unscheduled final paycheck. Follow these steps for whichever type you want to create.

For Unscheduled Payroll

  1. Go to the Payroll menu and select the Employees tab.
  2. Select the ▼ dropdown and then one of the following: Bonus only, Commission only, or Fringe benefits if you already selected one of these as the pay type.
  3. Select As net pay if you know the exact amount you need to pay the employee. Otherwise, select As gross pay.
  4. Enter any additional info about taxes or paycheck calculations.
  5. Select the bank account you use in QuickBooks to track this type of payroll transaction. Also review the pay period and pay date.
  6. Select the employees you want to pay.
  7. Enter their hours, compensation, memos, or any other necessary paycheck info.
  8. Under Pay Method for each employee, select the link to choose a paper or direct deposit paycheck.
  9. Select Preview payroll.
  10. Select Preview payroll details to review the details. Then select Save for later or Submit payroll.
  11. When you're ready, select Finish Payroll.

Once you create the employee’s final paycheck, update their employee status. This removes them from your active employee list so you don’t get billed for them anymore. Here's how to update their employee status.

For Scheduled Payroll

  1. Go to the Payroll menu and select the Employees tab.
  2. Select Run Payroll. If you have a payroll schedule, select it and then select Continue.
  3. Select the bank account you use in QuickBooks to track this type of payroll transaction. Also review the pay period and pay date.
  4. Select the employee you want to pay.
  5. Enter their hours, compensation, memos, or any other necessary paycheck info.
  6. Under Pay Method for each employee, select the link to choose a paper or direct deposit paycheck.
  7. Select Preview payroll.
  8. Select Preview payroll details to review the details. Then select Save for later or Submit payroll.
  9. When you're ready, select Finish Payroll.

Once you create the employee’s final paycheck, update their employee status. This removes them from your active employee list so you don’t get billed for them anymore. Here's how to update their employee status.

In QuickBooks Desktop payroll, there's a specific termination paycheck type.

Important: If you need to create a second paycheck (to cover things like a separate check for severance pay), choose Scheduled Payroll or Unscheduled Payroll first. Create these types of paychecks before creating the termination paycheck.

  1. From the Employees menu, select Pay Employees and then Termination Check.
  2. Review the Pay Period Ends date, Check date, and the Bank Account the payment comes from. Important: To avoid a late fee, date the check for today or a future date.
  3. Put a checkmark next to the employees you need to give a termination paycheck to.

Next, create a termination check:

  1. Under the Release Date column, select the Calendar icon. Then select the employee's release date. Or enter the employee's release date.
  2. Enter and review the hours or salary.
  3. Select Open Paycheck Detail to review the paycheck details.
  4. If you want to send the check as a direct deposit, select and check the Use Direct Deposit checkbox. If you don't want the paycheck to be a direct deposit, select and uncheck the option.
  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 go back to the Enter Payroll Information window.

Important: If you're using direct deposit to pay the termination check, you must send payroll to Intuit by 5:00 p.m. PT two banking days prior to the check date.

Now you can finish processing the paycheck:

  1. On the Enter Payroll Information window, select Continue.
  2. In the Make Employees Inactive window, select Make Inactive to make the employee inactive. They won't show up on payroll anymore. Or select Keep as Active.
  3. Review the amounts for each employee.
  4. Review the Check/Direct Deposit printing options.
  5. When you're ready, select Create Paychecks.

For QuickBooks Desktop Payroll Assisted users, or if you send checks by direct deposit

If you have QuickBooks Desktop Payroll Assisted or use direct deposit, follow the steps to send your payroll information and direct deposit paychecks to Intuit.

Important: QuickBooks Desktop won't warn or charge a late payroll processing fee of $100 as long as:
  • The employee has a release date in the employee record that matches the payroll send date (or an earlier date).
  • The paycheck date is today or later.

In Intuit Online Payroll you can create regular, bonus, commission, or fringe final paychecks.

  1. Go to the Payday tab and select a pay schedule.
  2. Select the type of check you’re creating from the Check Type field. If you want to run a scheduled payroll, select Regular Check. For unscheduled payroll (including a separate check for severance pay), select Bonus Checks, Commission, or Fringe benefits. Then enter the additional info about taxes or paycheck calculations.
  3. After you select a check type, select Go.
  4. Select the employees you need to pay.
  5. Enter their hours, compensation, memos, or any other necessary paycheck info, including whether the paycheck should be a paper or direct deposit.
  6. Select Create Paychecks.
  7. Review the amounts and payment methods.
  8. When you're ready, select Approve Paychecks.

Once you create the employee’s final paycheck, update their employee status. This removes them from your active employee list so you don’t get billed for them anymore. Here's how to update their employee status.

Step 3: Update your employee's payroll status

Once you have created the final paycheck for your employee, update their employee status in your payroll service.

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