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Established Member

How to convert vendor to employee

I used to use QBmac which did not have manual payroll processing.  So, what I did, was set my employee up as a vendor, and I wrote them a paycheck that way.  I had a spreadsheet I used to calculate withholding, then I would take everything each quarter to my accountant, and he would give me payment coupons for the various withholding amounts.  

I recently switched to QB Pro 2016 for Windows and I'm working on setting up manual payroll(holy smokes they make it hard).  I've got everything set up, but now what I would *like* to do, is convert this employee's pay data into the Quickbooks Payroll.  So, what I have looks like this:

Vendor Name: (my employee)

A total of 18 checks were written to this employee, all for the *net* pay amount, and that was tied to me "Employee Wages" account (expense type).

Since this is my only employee, it seems like I could do the following steps to achieve what I'm looking for:

1. Rename my vendor from "joe smith" to "joe smith_v"

2. Delete all 18 checks

3. Set up "joe smith" as an employee

4. Re-enter all 18 checks through the "Pay Employee" interface(using the same check numbers)

Does that sound legit?  I've never paid through the "pay employee" interface, so I'm guessing you just enter in their hours for the pay period, and it will properly set up the paycheck, and increase the withholding liability accounts per the tax tables, etc.  Correct?

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Best answer 12-10-2018

Accepted Solutions
Established Community Backer ***

Run your Reports menu > Employees & Payroll, Payroll Summ...

Run your Reports menu > Employees & Payroll, Payroll Summary report, set the date range to This Fiscal Year To Date, and if you pay weekly, set the columns to Week.

I see the pay period in your image is only 6 dates; be careful. Dates Matter.

"What is my next step?"

Once you confirm the existing data is correct, set up the next employee and start using the payroll functions for real.

Remember that for Manual Payroll, the tax items and the wage limits are not given any consideration; the data file that is set to Manual Payroll Calculations means you intend to manage and control everything.

For making entries, I showed two attachments for Paycheck Details. Look at the unshaded = this is where you make your entries. Notice on the right side of the one image, the word "adjusted" is seen; this tells you this has something manually entered or changed. Both your left and right sides will be Adjusted.

You can make calculations right in those fields, like this:
For Social Security:
Enter Gross $1,200 and then multiply by .062...

1200*.062 (then TAB or enter key)
7 Comments
Established Community Backer ***

Run your Reports menu > Employees & Payroll, Payroll Summ...

Run your Reports menu > Employees & Payroll, Payroll Summary report, set the date range to This Fiscal Year To Date, and if you pay weekly, set the columns to Week.

I see the pay period in your image is only 6 dates; be careful. Dates Matter.

"What is my next step?"

Once you confirm the existing data is correct, set up the next employee and start using the payroll functions for real.

Remember that for Manual Payroll, the tax items and the wage limits are not given any consideration; the data file that is set to Manual Payroll Calculations means you intend to manage and control everything.

For making entries, I showed two attachments for Paycheck Details. Look at the unshaded = this is where you make your entries. Notice on the right side of the one image, the word "adjusted" is seen; this tells you this has something manually entered or changed. Both your left and right sides will be Adjusted.

You can make calculations right in those fields, like this:
For Social Security:
Enter Gross $1,200 and then multiply by .062...

1200*.062 (then TAB or enter key)
Established Member

OK, I ran the report.  All of his paychecks and withholdi...

OK, I ran the report.  All of his paychecks and withholding amounts line up and match correctly - Thank you.

I'm down to my last couple of questions which have to do specifically with payroll taxes I already paid for 1st quarter 2016.

Because I was just using an Excel spreadsheet to calculate withholding amounts, I never realized until now, that YTD income, and county of residence can change the withholding amounts over time.  So, long story short, I'm pretty sure I under-withheld from my employee's paycheck this entire time.  Naturally I've arrived at this assumption because the dollar amounts my accountant had me pay in payroll taxes seem to be more than what I withheld - woohoo for me - lesson learned.

Question:  Now that I have all of my employee YTD info entered correctly, how do I enter the YTD payroll taxes which I have already paid?
Established Community Backer ***

"and the amount Quickbooks calculated for payroll liabili...

"and the amount Quickbooks calculated for payroll liabilities was different than the amounts my accountant had me send in (last quarter)."

You Change Them. You are doing something after the fact, and you already have values. You don't "let it calculate" and leave it. You have Actuals, so enter them. Change what got calculated. This is Your data.

"I'm frustrated and wondering if what I'm doing is even necessary.  Can I just not worry about this?"

You cannot jump into Payroll mid-year with no YTD data; many things have Wage Limits. Transitioning on Jan 1 would be different.

"I only had (1) employee, and he is no longer employed with me as of May of this year."

If you have no need for Payroll at all, stop trying to do payroll.

"Now that I have QB Pro which can do manual payroll, I plan on using it.  I'm also planning on hiring a new employee possibly this week.  From here out, I want to use QB's payroll feature."

You cannot only have Some payroll data in the payroll function. For instance, you won't have W2 info or 940 info for Both names unless you populate PR for the old person, too.

"My question is, do I even *need* to enter my ex-employee in the employee section?"

Only if you want "payroll to be right."

"I would then take the net amount, and print a check using my QB expense account "Employee Wages".  Simple enough - right?"

That was never right. Payroll math:

Gross wages + employer taxes = Payroll expense

Takehome is a component of Gross, like this:

Take home + employee share of taxes (held as Liability) + any other withheld amount (held as liability) = Gross Wages

Employer taxes are sent with employee share, so that means Employer taxes are:

Tax expense = liability

Then, the Banking pays out Liability, not expense.

This is Cash Flow, not Expense.

"Do I *need* to enter his YTD info, and all of the paychecks I wrote him?"

From the beginning, we covered you Don't have to enter Paychecks because you already have the Accounting. You need to Populate the payroll items with values for prior activities that happened in this year. I believe you are the one that wanted to remove the vendor name and transactions, and change to the employee name and change to employee paycheck as transaction type activities.

"Can I just leave everything the way it is, draw a line in the Quickbook sand, and move forward?"

Please understand there is the In Between Function:

Set up Payroll using the payroll wizard and making YTD entries for each month, and this is going to use the option NOT to Affect Accounts, as I attached, so that you populate the prior activity for the Employee name that happened already, but Not Creating Each Paycheck. Populate YTD, populate Taxes, populate UI, etc.



Established Member

OK, and first, thank you so much for helping me work thro...

OK, and first, thank you so much for helping me work through the understanding on this.  I'm getting confused because I'm taking in too much at one time.  Perhaps I'll just ask for the next step and you can tell me?

As per your suggestion, I edited my employees name (in the vendor center because I had previously set him up as a vendor).  I placed "X" in front of his name and marked the vendor inactive - done.  Then I created him as an employee, filled in all the pertinent info (W4, etc) for him.  After that, I managed to enter in all 18 checks he was issued this year.  I did this through the "enter paychecks" spreadsheet looking screen.  After that, I checked each entry to make sure that "Do not affect accounts" was checked - it is.  I then entered for each of the 18 transactions, the dollar amounts I withheld (MD, Medicare, etc).  So, if I'm understanding you correctly, I have now "populated the YTD data" for this employee.  I've attached a couple of screen shots for authenticity.

<a rel="nofollow" target="_blank" href="http://imgur.com/a/UgDoa">http://imgur.com/a/UgDoa</a>

What is my next step?
Established Community Backer ***

"but now what I would *like* to do, is convert this emplo...

"but now what I would *like* to do, is convert this employee's pay data into the Quickbooks Payroll."

You cannot "move" the vendor name. Put an X in the beginning and then make it Inactive, so it doesn't show for selection.

You cannot Move anything to payroll, either. And, you don't have to. You have accounting data; there is nothing to Move about it.

Don't delete and re-enter. You already have Activity. Unless you really have nothing else to do this month?

Set up the Employee and your YTD existing info is going to be used to Populate payroll in the Payroll setup wizard; pay attention to the Options button NOT to affect accounts. You want everything to get its "background" for YTD, but NOT also hit expense, bank and liability again.

Please see my screenshot attached.

"so I'm guessing you just enter in their hours for the pay period, and it will properly set up the paycheck, and increase the withholding liability accounts per the tax tables, etc."

Setting you the Employee Default before adding employees gives everyone the "starter" settings; or, edit the names. You want to set them to "pay from time data" so that payroll reads the Timesheet and you use the Timesheet for data entry.

Intuit removed all the video tutorials from these products. I put the links here, for us:
2015 and 2016 video tutorials

Established Member

OK - pretty close to giving up.  Also, happy 4th.  I ente...

OK - pretty close to giving up.  Also, happy 4th.  I entered all of the employee checks in, and the amount Quickbooks calculated for payroll liabilities was different than the amounts my accountant had me send in (last quarter).  I'm frustrated and wondering if what I'm doing is even necessary.  Can I just not worry about this?  Let me explain my situation very clearly, and you can let me know if you think I'm being too anal about this and should just forget it.  

I only had (1) employee, and he is no longer employed with me as of May of this year.  The way I used to pay him was through an Excel spreadsheet which would calculate all of his withholding amounts if I just entered his hours in.  I would then take the net amount, and print a check using my QB expense account "Employee Wages".  Simple enough - right?  At the end of a quarter, I would go see my accountant, bringing him my home made payroll report, which showed all of the checks, gross pay, and all of the withholding amounts for each category.  My accountant would give me some payment coupons, and I would print out each check (MD unemployment, FED withholding, etc) using my Quickbooks Expense account "Payroll Taxes".  That's it.  That was my entire payroll operation.

Now that I have QB Pro which can do manual payroll, I plan on using it.  I'm also planning on hiring a new employee possibly this week.  From here out, I want to use QB's payroll feature.

My question is, do I even *need* to enter my ex-employee in the employee section?  Do I *need* to enter his YTD info, and all of the paychecks I wrote him?  Can I just leave everything the way it is, draw a line in the Quickbook sand, and move forward?
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Established Community Backer ***

"which have to do specifically with payroll taxes I alrea...

"which have to do specifically with payroll taxes I already paid for 1st quarter 2016."

Which means you already have the Accounting data, so again, this is a Not Affect Accounts scenario.

"Because I was just using an Excel spreadsheet to calculate withholding amounts, I never realized until now, that YTD income, and county of residence can change the withholding amounts over time."

Well, they don't. YTD is Accumulation. There are taxes that have Wage Limits, such as FUTA stops at $42 for $7,000 of wages. Is that what you mean?

County of Residence seems like a Local Option tax for specific wages?

"So, long story short, I'm pretty sure I under-withheld from my employee's paycheck this entire time."

Well, it's a bit late to try to collect from that person and send it in. Your Reporting should have brought up any issues.

"Naturally I've arrived at this assumption because the dollar amounts my accountant had me pay in payroll taxes seem to be more than what I withheld - woohoo for me - lesson learned."

Are you overlooking that the Employer pays a share?

"Question:  Now that I have all of my employee YTD info entered correctly, how do I enter the YTD payroll taxes which I have already paid?"

You already have it, as banking entries and expense entries. Your previous payroll would be:

Gross Wages + employer share of taxes = Total Payroll Expense