It’s the holiday, and many employers are considering their options for bonuses or other “special year-end payroll” payments. In fact, we recently received an email asking how to configure payroll so that each employee receives a specific amount as his net bonus paycheck.
If you use QuickBooks Enhanced Payroll or Enhanced Payroll for Accountants, you can enter the net dollar amount of a paycheck in the Check Amount field. QuickBooks actually will calculate and add the proper tax withholding and deductions to this amount.
This feature allows you to not only "gross up" the net amount to arrive at the appropriate “earnings,” but also the appropriate employee and employer taxes.
- Open the Payroll Center and select the option to Start Unscheduled Payroll:
Unscheduled payroll option
- In the Enter Payroll Information window, select the employee(s) you want to make a holiday bonus payment to. Make sure the correct information is reflected in the Pay Period Ends and Check Date windows. In this example, the pay period ends at the end of the next regular pay cycle, but the special holiday bonus is being paid early. (Note: The normal payroll for the period will still be paid on the normal date and time for the end of the period.)
Enter Payroll Information window
- Click the Open Paycheck Detail – button. QuickBooks will open the Preview Paycheck window for the first employee in the list:
Regular paycheck
- Carefully examine the displayed paycheck looking at two key areas:
- Earnings – QuickBooks can only calculate the “gross up” amount when a single earnings item is present. The earning items must either be a “salary type” item or a “bonus type” item. That means you must remove all earnings items, including “hourly-rate” type items that are not one of these two types. Some employers may choose to use the regular salary item for salaried personnel and a “bonus” item for hourly personnel. I typically recommend you use a special “bonus” item (for all personnel) and enter that item as the sole earnings item on each paycheck.
- Other Payroll Items – You don’t want to included additions or deductions in this special payroll that would be included in a normal payroll check. For example, in the above example, we don’t want to deduct an extra amount for Health Insurance in this special bonus situation. Zero out any payroll additions or deductions that shouldn’t be included in this special “bonus” check.
In the example below, we have inserted “Bonus” (a bonus-type item) as the sole earnings item. We also have zeroed out the Health Insurance amount in this special bonus check.
Prepare check for bonus amount
- Now click the check box at the bottom right of the paycheck preview that reads, Enter net/Calculate gross. QuickBooks opens the Check Amount field (highlighted in green in the example below), so you can enter the net amount of the check.
Open Paycheck Net Check Amount
- Enter the net check amount in the Check Amount field of the Preview Paycheck window. In our example, we want this employee to have a take home bonus of $500.00 When we enter $500.00 in the check amount field; QuickBooks calculates the appropriate taxes and required deductions, as well as the gross amount and posts that gross earnings rate.
Bonus Check
This allows you to give the employee a paycheck for the exact “take home” (net payroll) amount you want them to have as a holiday bonus. It also insures that all of the tax requirements are correct for both the employee and employer.
- Now just click Save & Next (if you're processing more than one employee bonus) or Save & Close if you’re finished processing holiday bonus checks:
Review Bonus Checks
- Once all paychecks have been entered, QuickBooks returns to the Enter Payroll Information window, verify that all of the paycheck (gross) amounts are correct. If you’re using the “Bonus” item, they’ll all be listed in the bonus column, as can be seen below. Click Continue.
Review Paychecks Window
- Click Create Paychecks – QuickBooks now displays the Confirmation and Next Steps window that allows you to either Print Paychecks or Print Pay Stubs. Proceed as you normally would from this standpoint, either printing paychecks or processing pay stubs for paychecks that are directly deposited.
QuickBooks “Enhanced” payroll options for QuickBooks desktop software make it easy to compute specific amount payroll checks when it comes time to give that special holiday or end of the year bonus.
So, we’d like to wish you Happy Holidays and a very good end of the year.