How to Setup Payroll for Job Costing
Many of my clients believe that setting up payroll in QuickBooks for job costing is frustrating and difficult. There are several steps that need to be taken in order for payroll to flow properly to the job costing reports, especially if you want to include payroll taxes and benefits. The step-by-step instructions below will help guide you through the setup. Then you won’t have any problems.
These instructions assume you have a subscription to QuickBooks payroll. If you are trying to use job costing with a non-QuickBooks payroll provider, you will not only make your bookkeeping more time-consuming, but also introduce opportunities for errors to be made.
Please try L & R Tax Preparations on line payroll service if you do not have one at this time. We’re using Intuit web hosted Payroll service for our online payroll clients.
Here are the steps:
Set up Preferences:
1. Go to Edit > Preferences > Company Preferences and select Payroll & Employees
2. Select “Full Payroll” or “Complete Payroll Customers”
3. Check “Job Costing, Class and Item tracking for paycheck expenses”
4. Go to Time & Expenses
5. Select Yes under “Do you track time?”
6. You may also want to check “Create invoices from a list of time & expenses”
Set up Payroll Items:
1. Go to Lists > Payroll Items
2. Edit every Addition and Company Contribution item to ensure that “Track expenses by job” is checked
3. Payroll items can only map to one expense account, so you may want to setup separate ones for COGS and overhead payroll expense
4. You can’t assign or have two payroll items for payroll taxes
Set up Employee Records:
1. Go to the Employee Center and double-click on employee name
2. Change Tab to Payroll & Compensation Info
3. Check “Use time data to create paychecks”
If you want to Set up Default for New Employees:
1. Go to the Employee Center and select Manage Employee Information > Change Employee Default Settings
2. Check “Use time data to create paychecks
Set up Workers Comp:
1. Setup workers comp at Employees > Workers Compensation > Setup Workers Comp
2. Setup your workers comp codes at Employees > Workers Compensation > Workers Comp List
3. Go to Lists > Payroll Items to double-check that the Workers Comp payroll item has “Track expenses by job” checked
Using Timesheets
1. Go to Employees > Enter Time > Use Weekly Timesheet
2. Complete all information including both a payroll item & a service item (these are different) – mark as billable if you do time & material billing
3. You may want to add a customer job for overhead
4. Consider using Time Tracker or WorkTrack Time Card so employees can enter their own time.
L & R Tax Preparation also offers TimeTrackingSalesSheet for its payroll clients.
If you have more questions concerning payroll or setting up payroll please feel free to contact us at L & R Tax Preparation.
For more readable information:
Social Security and Medicare (FICA) Taxes
Social Security and Medicare (FICA) Taxes
The Federal Insurance Contributions Act (FICA) is a federal law that requires you to withhold two separate taxes from the wages you pay your employees: a social security tax and a Medicare tax. The law also requires you to pay the employer’s portion of these taxes. Unless you have employees who receive tips, the employer’s portion will be the same as the amount that you’re required to withhold from your employees’ wages.
Each of the FICA taxes is imposed at a single flat rate. Currently, the social security tax rate for employees is 6.2 percent and the Medicare tax rate is 1.45 percent. The taxes are unaffected by the number of withholding exemptions an employee may have claimed for income tax withholding purposes. You simply multiply an employee’s gross wage payment by the applicable tax rate to determine how much you must withhold and how much you must pay.
Let’s assume you have one employee, to whom you pay gross wages of $500 every two weeks. You must withhold from each paycheck $31.00 in social security taxes ($500 x 6.2%) and $7.25 in Medicare taxes ($500 x. 1.45%). You will also owe equal amounts ($31.00 in social security and $7.25 in Medicare) as the employer’s portion of the taxes. In other words, each $500 wage payment will create a combined FICA tax liability of $76.50.
The social security tax is subject to a dollar limit, which is adjusted annually for inflation. For 2010, your obligation to withhold and to pay the social security tax for an employee ends once you’ve paid that employee total wages of $106,800.
However, there is no ceiling on the Medicare tax. You must continue to withhold and to pay the Medicare tax regardless of how much you pay an employee.
For 2010 only, you may be exempt from the employer’s 6.2 percent portion of the social security tax with respect to any employee hired after February 3, 2010 if that new employee was unemployed (or was not employed for more than 40 hours) during the 60-day period leading up to the date you hire him or her. This exemption is provided by the provisions of the HIRE Act enacted by Congress on March 17, 2010. Check the IRS website for information on this special tax exemption.
If you have more questions feel free to contact me.
If you feel you need payroll services please see my web page Payroll or Online Payroll. if you have payroll questions please contact us here: payroll@lrtaxprep.com.
Making Work Pay tax credit
April 1st was implementation day for the Making Work Pay tax credit, and it wasn’t an April Fool’s joke. The American Recovery and Reinvestment Act of 2009 (ARRA), Congress’ most recent effort to “stimulate” our economy, contains this new tax credit, which will affect everyone when filing your individual return. You may be able to take advantage of an income tax credit of as much as $400 ($800 for a married couple) on your personal tax return for the next two years.
The Making Work Pay tax credit served as centerpiece of the tax reduction provisions of the ARRA. President Obama strongly pursued its inclusion in the legislation because it would put money back into the pockets of working people. The annual tax credit (available in 2009 and 2010) is equal to 6.2% of earned income, to a maximum credit of $400 for an individual ($800 for a married couple filing jointly). The Key is “a maximum credit of $400 per working individual”. Dependants have no bearing on this.
Technically, taxpayers will receive the tax credit when they prepare and file their tax returns a year from now for 2009 (and then for 2010 the next year). However, practically speaking, taxpayers that receive wages from employment in 2009 will receive the tax credit in small increments throughout the year. How? The IRS in late February issued a new set of withholding tables structured to informally pay the amount of the tax credit over the course of the year by reducing required withholding amounts on payroll.
The Issue
The new withholding are designed to save employees roughly $10 per week for the rest of the year (40 weeks x $10 = a $400 tax credit). This isn’t working out for a lot of people. Several of my clients have called me because they are having more taken out then the ten dollars, some are even getting as much as forty-three dollars more a week.
This is a problem and will affect refunds and or amount due/s. Why, because you aren’t having as much withheld, and tax tables on your income haven’t changed. Withholdings went down, not income tax on your earnings.
The IRS produced new withholding tables in February and asked employers to implement them by April 1. But, withholding tables are a blunt instrument, unable to precisely assess taxes for everyone’s unique situations. Employers who use the tables don’t know workers’ complete situation, such as whether an employee has a second job or is married to someone who also works. That means some workers will end up with more cash than they’re eligible for under the new credit.
Adjustments may have to be made by individuals to make sure they’re not over- or under-withheld.
Again, the lower withholding may cause some unwanted results for taxpayers with more than one job, two-earner married couples, and high-income taxpayers.
The Fix
The IRS is aware of this issue and warns taxpayers that they (individual taxpayers) are responsible for making sure their withholdings are correct. This means that you are ultimately responsible for making sure you have enough withheld from your checks using your form W-4.
The first thing you can do is make sure your employer has these new tables. The new tables and instructions are found in IRS Publication 15-T. The next thing to do would be to Contact your tax professional and discuss this with them.
If that isn’t a viable option you can contact me I will be glad to help.
Beware, though, because the credit is phased out as your adjusted gross income exceeds $75,000 for individuals ($150,000 for married couples filing jointly). If your income exceeds $95,000 ($190,000 for married couples filing jointly), then you will not be able to receive any benefit from the Making Work Pay tax credit.
Timing is everything, especially with taxes … and tax information.
The IRS has an online calculator that reflects the new stimulus act withholding tables to help you get your amount just right. Armed with your most recent tax return and paycheck stub, you can in 10 minutes or so fill in the required information and get instructions on filling out a new W-4. You should use the calculator now. Then again, later in the year to ensure your assumptions are on track (around the end of October). You can always make a tweak or adjustment with your very final paychecks for the year so you don’t have any penalty or big surprise.
If you don’t have the time to run through the calculator — it involves entering various tax-related figures, including expected credits and the like — there’s another way: Submit a new W-4 filled out the same way as your old form but with one exception: On line 6, add the extra dollar amount to be withheld from each paycheck. See Form W-4 on IRS site (PDF).
The easiest way might be to leave the number of allowances alone, see how much they’re reducing your withholding by and then on line 6 write in that you want them to withhold an extra amount.
But remember: That W-4 stays in effect until you file a new one. If you don’t want the same additional amount to be withheld starting in January, file a new W-4.
There’s a third option: Don’t worry about the credit now, and just wait until you file in 2010 to pay the bill. Not recommended by me unless your checks are exactly $10.00 more per week.
The “extra check”
Getting paid every week or every-other week most have it figured out that they have what they consider an extra check some months.
To me the debate is it actually and extra check? If you get paid every other week then you probably see two of these months when you actually are getting three checks for the month instead of two. If you get paid every week you probably see five of these but check you calendar to be sure.
To truly make it an extra check try this approach:
Figure how much you need to cover your regular monthly bills. Total everything for the whole month. If you get paid every other week divide this total by two, if every week by four. This is what you must have set aside from every regular paycheck to cover your monthly expenses.
If you have trouble keeping track of how much of your balance is available for other spending, consider transferring this amount to a separate checking account, reserved just for your bill payments.
Now add up your irregular bills during the year. These include any bills or expenses that aren’t due monthly and can include everything from taxes to insurance, holiday presents and/or back to school supplies. Now divide the annual totals of all these expenses by 24, and arrange to have the amount transferred out of your checking account to a savings account twice a month. I recommend/like ING The Orange Savings Account. Great rates, no fees, no minimums.
As you go, make adjustments. You may have been using your first paycheck every month to cover a big bill, like your mortgage/rent or car payment. Give yourself some room by paying that bill ahead, setting aside enough cash from your other checks to cover the next months “shelter”. You’ll have one very tight month as you get started, but you’ll get ahead of it.
Now plan for the extra cash. When your regular bills are covered and your saving ahead for your annual expenses you can put the “extra” paychecks to good use. How you do this totally depends on your budgeting system and your priorities.
The important thing is to have a plan and to follow through when the money actually gets to you.
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