I'm in the process of switching from biweekly payroll to semimonthly. The actual change is simple, but I was wondering what should be done about the "catchup" that I need to now pay my salaried employees.
We have yet to hit a month where three checks went out, so the overall payout from biweekly pay is much less than it would have been under semimonthly checks, so I owe my employees an extra payment to offset the difference. I was thinking of adding on a one-time benefit to the next pay period that catches them up to where they should be, but was not sure if this was the right way to do this (likely not as a bonus because those have different tax rates). What's the best way to achieve this in QBO?
Hi there, @Anonymous.
Good to see you in the Community. I can help share some insight about adding an extra payment to your employees' paychecks for the next pay period.
You can either create an additional paycheck for each employee to catch up for their current wage or enter a new other earnings item to their paychecks to get this straightened out. Other earnings are taxable payments to an employee that are separate from regular wages and used to calculate deductions.
If you prefer the latter, please refer to the steps below to set this up:
- On the left pane, select Workers.
- Choose Employees.
- Select the name of the employee.
- Click the Pencil icon next to Pay.
- Scroll down and click Even more ways to pay....
- Click Add additional pay types, and enter a unique name for the pay type.
- Enter the amount in the $ field to make the amount recurring, or leave it blank and just enter the amount when running payroll so you can use it for other employees.
- Click Done.
After that, you can add this pay type to your other employee's profile. Then, when you're ready to run payroll, just enter the extra payment in the new payroll item's field.
I've attached some articles about this for additional reference:
That should get you back on track. Stay in touch if you have any other questions about this process, or if you have any other questions about payroll. I'll be happy to help you out. Have a wonderful day.
Dropping in to provide some insights, alex-pearce.
Yes, you'll want to create deduction item to reduce the amount.
Here's how to do it:
- In the employee set up, click the Add a new deduction link under Does [employee name] have any deductions? (Examples: retirement, health care).
- Choose Deduction/contribution under Deduction/contribution or garnishment drop-down.
- Under Deduction/contribution drop-down, choose New deduction/contribution.
- Under Deduction/contribution type, choose Other deductions.
- Under Type, choose Other after tax deductions.
- Enter a Description or name of the deduction item, and then enter the amount per pay period.
- Click OK.
The Community is always here for you if you have other payroll questions. Feel free to post.
Thanks @ShiellaGraceA. Shouldn't I use a pre-tax deduction since I would have already paid the tax on the extra amount given in the prior checks? I wouldn't want to be double taxed on the difference between the older checks and the current ones.
- Original paycheck is for $1000/mo for as $12000 salary.
- New paycheck is for $800 for a $9600 salary.
- After 6 months, I've already paid my employee $6000, so he is due $3600 for the remaining 6 months.
- Quickbooks will create a check for $800 but I want to reduce it to $600 so that I'm not overpaying. I should add a pre-tax deduction to the $800 check reducing it to $600 since I already paid taxes on the $200 difference in the previous checks
- Alternatively, I could adjust the annual salary so that going forward, Quickbooks creates the $600 paycheck. I would then reset the salary to the desired amount at the end of the fiscal year. This option feels dirty though.
Thank you for getting back to us, @alex-pearce.
You're right. You'll need to set up your deduction item as pre-tax. Let me provide some details.
Setting up your deduction item as Other after tax deduction means that your deductions are taken out from your employee's net pay. And setting it up as a Pre-tax deduction denotes that deductions are taken out from the gross pay.
Also, if you set up your deduction as pre-taxed, you won't be taxed twice on your paychecks.
You may follow the steps given by my colleague above in setting up a deduction.
Fill me in if you have any other concerns.
I'd be glad to help you further with your deductions, @alex-pearce.
Thank you for providing me with a screenshot.
There are several deductions which are pre-taxed in QuickBooks Online. Some of these deductions include:
- Health Insurances
- Retirement Plans
This said, you can choose between these deductions as a payroll deduction for your employee.
Also, I recommend reaching out to your accountant about your deductions. This way, they can provide you with their insights on which pretax deductions to use.
You may refer to this article for more information: Supported Pay Types and Deductions Explained.
Feel free to leave a comment below if you have any other concerns.