12 Steps to Manual Payroll in QuickBooks 2018 Desktop

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Each New Year a lot of people using QuickBooks try to decide if they are going to renew their 'payroll subscription', or if they can somehow use QuickBooks for manual payroll.  In 2013 I wrote one of our all time favorite articles called '12-steps to manual Payroll in QuickBooks', then in 2014 I revisited the topic to insure that QuickBooks 2015 would also permit the manual payroll option to be used. 

Well, someone wrote in a week or so ago saying they couldn't get 'manual payroll' to work for QuickBooks 2018 using the articles in my earlier 12-step articles.  So I decided I would try it out, and it worked without a hitch. l was able to set-up a QuickBooks 2018 Sample File for manual payroll using my 12 steps without any problems at all.

Many small businesses using QuickBooks (desktop) want to automate payroll within their accounting, but many cannot afford a payroll subscription. This article is intended to insure that readers are aware that you can still prepare payroll manually inside of QuickBooks, even the newest 2018 desktop version.

A large number of mom-n-pop businesses who are starting to grow have been preparing payroll for their few employees using the old fashioned method of looking up tax tables to process payroll deductions and then hand-write or type paychecks.  While this may not be the best approach it is still an alternative; however, QuickBooks stopped featuring this ‘built-in’ functionality years ago in favor of promoting payroll subscriptions. 

While ‘manual payroll’ is not simply a select it option in the payroll preferences it is still and option because QuickBooks (desktop) can still be set-up to allow them to process manual payroll. To turn on ‘manual payroll’:

Step 1 - Click Help on the QuickBooks bar, the select QuickBooks Desktop Help.

Step 2 - Search for the manual setup article by typing calculate payroll manually,

Step 3 - Help will display a series of payroll topics, click on the topic: Calculating payroll taxes manually (without a subscription to QuickBooks Payroll).

Step 4 - Help opens the topic window, read the information thoroughly, including the disclosure where Intuit is telling you that if you use manual payroll processing they assume no liability for any improper calculations. [Note: if you have been preparing payroll from tax tables since your first employee you were already assuming all the liability for doing so.]

Step 5 - Near the end of the displayed information, you will find a one sentence paragraph that reads “Set your company file to use the manual payroll calculations setting” (shown in the red box below). Click on the words manual payroll calculations (shown at the blue arrow below) which links you to yet another Help window.

Step 6 - This new help-window displays an additional message asking “are you sure you want to set your company file to use manual calculations?” There is some more verbiage on the screen that is intended to make you think twice about not subscribing to an Intuit Payroll Service. At the very bottom of this window you will see where it says, click here: Set my company file to use manual calculations (as shown by the blue arrow below). If you wish to continue you must click on those words to proceed.

Step 7 - QuickBooks pops-up a message box (highlighted in the red box below) advising that “You must now calculate and enter your paycheck amounts manually. If you currently have an active QuickBooks Payroll Service Subscription, you must call the Intuit Payroll Service to cancel your subscription and avoid future charges.” Click OK (shown by the blue arrow in the  next illustration) to proceed.

Step 8 - Manual payroll processing has now been activated.  You may need to turn-on payroll preferences (Edit > Preferences > Payroll & Employees > Company Preferences) if you have never used payroll in QuickBooks.

You will find that ‘Payroll items’ have been added to the List Menu, and you have access to the same type of payroll item functionality that payroll subscription users make use of, with the exception that all ‘figures’ such as tax rates must be entered by you.

Step 9 - Payroll checks and other payroll functionality that had been turned off in your QuickBooks file are now available.  NOTE: You must set-up at least one employee before the actual 'paychecks' feature is available under Pay Employees.

Step 10 - You can set-up your payroll items, employees and process payroll and payroll taxes in exactly the same way you would if you had a payroll subscription with one exception, you must calculate all taxes manually (using either manual tax tables or tax formulas).

  • In some cases payroll tax items will generally remain constant, such as the rate for Medicare and Social Security. (Check your tax tables for current rates.)
  • In other cases you will need to ‘compute’ (with paper tax tables or formulas) the tax to be applied when processing the paycheck, such as Federal Withholding.
  • In all cases you will want to confirm and/or enter and verify the accuracy of the tax computations you key into the appropriate boxes (shown in red above).

Step 11 - Just remember you are on your own, exactly like you were when you hand wrote paychecks with the only difference being that QuickBooks is posting and tracking the data you enter.

Step 12 - Unfortunately you cannot prepare or print payroll tax forms using ‘manual payroll’; however, you can easily find the information, within QuickBooks Payroll reports, you need to prepare those filings manually or enter in an on-line reporting system such as EFTPS (Electronic Federal Tax Payment System).

It is hard to determine the value of the manual payroll option over a paid payroll subscription.  For larger businesses one can expect that a payroll subscription will be more cost effective than the task of having to look-up tax tables for each payroll as required by this process. 

On the other hand, for a small one or two man shop, this manual option may be the most cost-effective alternative, especially if their paychecks tend to remain constant from one pay period to the next. 

While there are a variety of payroll options for QuickBooks desktop users from not only Intuit, but other payroll providers, I am happy to say that the 'manual payroll' option is still available within the desktop software if you simply follow my 12-steps and then take the responsibility of doing payroll correctly the manual way.

I'm sorry to say, I have not figured out any method to do 'manual payroll' in QuickBooks Online.