How to Integrate Payroll with QuickBooks Online

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Overview: Built‑in vs Third‑Party Payroll

QuickBooks Online Payroll (QBO Payroll) is Intuit’s built‑in payroll that syncs directly with QuickBooks Online (QBO) for wages, taxes, deductions, and employer contributions. It supports automated calculations, e‑filing/e‑payments, and direct deposit. For teams already on QBO, this is the fastest path to a fully integrated payroll‑to‑books workflow.

Alternatively, you can connect a third‑party payroll provider (e.g., ADP RUN, Gusto, Paychex, Rippling). These integrations usually post summarized payroll journals to QBO after each run. Choose this route if you need niche HR features or multi‑system consolidation—and ensure the app supports robust general‑ledger (GL) mapping and multi‑state tax support.

Before You Start: Setup Checklist

• Legal business name, address, EIN, principal officer info.
• State tax accounts (with deposit frequency and rates); local taxes if applicable.
• U.S. business bank account that accepts ACH for direct deposit and tax debits.
• Employee details: W‑4 info, pay rate/salary, pay type, benefit/deduction elections, direct‑deposit authorization.
• Prior‑year or year‑to‑date payroll totals if you’re switching mid‑year.
• Chart of accounts ready for wages, employer taxes, benefits, and payroll liabilities.

Step 1: Choose a Payroll Plan

From Settings ▸ Subscriptions and billing in QBO, verify (or upgrade) your plan. Consider:

• Core: Full‑service payroll with standard automations.
• Premium: Adds advanced features; includes QuickBooks Time.
• Elite: Adds expanded support and protections; best for growing teams.

If you’re migrating from a third‑party payroll, validate that your new plan supports your states, localities, and benefits.

Step 2: Turn On Payroll in QuickBooks Online

1. In QBO, go to Payroll ▸ Overview and start the guided setup.
2. Select your payroll service (Core, Premium, Elite) if prompted.
3. Follow the in‑product checklist until each task shows Done.

The setup wizard will later ask for tax details, employees, and banking. You can pause and resume any time.

Step 3: Company & Tax Details

1. Enter legal business info (EIN, legal name, address, primary contact).
2. For each tax jurisdiction (federal, state, local), add account numbers, deposit schedule, and applicable rates.
3. Complete any required e‑signature authorizations so Intuit can e‑file/e‑pay on your behalf where supported.
4. If you’re exempt from a tax, leave the account number blank and use a 0% rate where appropriate.

Step 4: Add Employees & Pay Schedules

1. Go to Payroll ▸ Employees ▸ Add employee.
2. Capture personal info, W‑4 elections, pay type (hourly/salary), pay rate, and any benefits/deductions (health, 401(k), HSA, etc.).
3. Assign a Pay schedule (weekly, biweekly, semimonthly, monthly). Create multiple schedules if needed.
4. Optionally assign Classes and Locations for job costing and departmental reporting.

If migrating mid‑year, enter each employee’s year‑to‑date wages, taxes, and benefits to ensure accurate W‑2 totals.

Step 5: Connect Bank & Enable Direct Deposit

1. Open Settings ▸ Payroll settings ▸ Bank accounts.
2. Connect your U.S. business bank account for payroll direct deposit and tax payments.
3. Complete verification steps (micro‑deposits or instant login, depending on your bank).
4. In each employee profile, add bank details and obtain direct‑deposit authorization.

Step 6: Add Time Tracking (Optional)

Using hourly or job‑costed labor? Add QuickBooks Time (included in Premium/Elite) or a compatible time app. Approve timesheets before running payroll so hours and overtime flow into gross pay automatically.

1. From Payroll or Apps, add QuickBooks Time.
2. Invite employees; configure earning codes and overtime rules.
3. Require timesheet approvals before payroll.

Step 7: Run Your First Payroll

1. Go to Payroll ▸ Run payroll and choose the pay schedule.
2. Select employees. Enter/confirm regular hours, overtime, PTO, bonuses, and reimbursements.
3. Review employer taxes and contributions. Verify pay date and pay period.
4. Click Preview payroll and fix any warnings (bank verification, missing W‑4, invalid rates).
5. Submit payroll. Print checks if applicable or confirm direct‑deposit processing.

Step 8: Automate Taxes & Forms

Choose how taxes and forms are handled:

1. Open Settings ▸ Payroll settings ▸ Taxes and forms ▸ Edit.
2. Select one: Automate taxes and forms, I’ll initiate payments and filings in QuickBooks, or I’ll pay/file myself.
3. Ensure any current liabilities are cleared before enabling automation so future filings process correctly.
4. Have the principal officer e‑sign any required authorization forms.

Automation coverage varies by plan and jurisdiction. Confirm local tax automation availability for your state/city.

Step 9: Map Accounting (Wages, Taxes, Liabilities)

Proper GL mapping keeps your books clean and your financials trustworthy. Review Payroll settings ▸ Accounting and confirm:

• Expense accounts for regular wages, overtime, employer taxes, benefits, and workers’ comp.
• Liability accounts for federal/state/local taxes, benefit withholdings, and garnishments.
• Classes/Locations for departmental or project reporting.
• Items/earning codes mapped to the right accounts.

Step 10: Reconcile & Close the Period

1. After each pay run, match the payroll direct‑deposit and tax debits to the corresponding payroll journal(s).
2. Reconcile the Payroll clearing and Payroll liabilities accounts monthly.
3. Download quarter‑end forms (e.g., 941) and confirm totals match your GL.
4. Lock the period after reports are approved.

Common Mistakes to Avoid

• Skipping year‑to‑date entries when switching mid‑year, causing bad W‑2 totals.
• Wrong deposit schedule or missing state/local accounts, leading to penalties.
• No bank verification before payday; DD fails due to unverified account.
• Unapproved timesheets or stale pay rates; overtime miscalculations.
• Poor GL mapping so wages/taxes hit generic accounts and break reporting.
• Late submissions—missed funding windows for direct deposit.

Helpful Tips & Best Practices

• Build a 3‑step cadence: collect & approve time → run payroll → reconcile & archive.
• Use Classes/Locations to separate departments, stores, or job sites.
• Automate taxes/forms once bank verification and first filings are complete.
• Document garnishment rules and benefit eligibility in your payroll SOP.
• Schedule calendar reminders for quarter‑end and year‑end tasks (W‑2/W‑3, 940, state reconciliations).
• If using a third‑party payroll, align the posting level of detail (per employee vs. summary) with your reporting needs.

Legal & Compliance Notes

• Always collect the latest W‑4 (and state equivalents) before first pay.
• Keep I‑9 and supporting documents on file per federal rules.
• Follow federal, state, and local minimum‑wage and overtime laws; verify exempt vs. non‑exempt classifications.
• Maintain written payroll authorization for direct deposit and any deductions.
• Observe state new‑hire reporting deadlines.
• If you outsource filings, confirm power‑of‑attorney/third‑party admin authorizations are active.

Real‑World Scenarios

1) U.S. Small Business: Monthly Close with Bank Reconciliation

A retail shop runs biweekly payroll. After each run, the bookkeeper matches the payroll debit and tax debit to the journal. At month‑end, they reconcile Payroll liabilities to $0 for remitted items and confirm unpaid items equal the next scheduled filings. The process shortens the close and reduces surprise variances.

2) Travel Agency: Seasonal Teams & Time Tracking

A travel agency hires seasonal guides. They add QuickBooks Time, enforce timesheet approvals, and run payroll weekly during peak season. Classes track “Tours” vs. “Back‑office” labor. When the season ends, they pause inactive employees and keep year‑to‑date records intact.

3) Wellness Clinic: Categorizing by Provider

A wellness clinic pays therapists hourly plus bonuses. The clinic uses locations for each branch and classes for service lines (chiropractic, massage, PT). Bonus codes map to a “Bonuses” expense. Monthly reconciliation confirms wages and employer taxes align to departmental P&L reports.

FAQ

How do I switch from another payroll to QuickBooks Online Payroll?

Finish the current quarter with your old provider if possible. Export year‑to‑date totals by employee and import them during QBO Payroll setup. Verify tax accounts, connect the bank, then run a parallel test before your first live run.

Can QuickBooks automatically pay and file my payroll taxes?

Yes—enable Automate taxes and forms in Payroll settings. Automation coverage depends on your plan and jurisdiction. Clear any existing liabilities before turning it on.

What if I use ADP, Gusto, Paychex, or Rippling?

Install the vendor’s QuickBooks Online app connector. Configure GL mapping (wages, employer taxes, benefits, liabilities) and posting detail (summary vs. per employee). After each run, verify that the posted journal matches your bank debits.

Do I need QuickBooks Time?

It’s optional but recommended for hourly teams and job costing. Premium/Elite plans include QuickBooks Time. Approvals ensure accurate hours before payroll.

How soon must I submit direct deposit?

For standard funding, submit payroll at least two business days before pay date. Same‑day/next‑day funding may be available depending on plan and eligibility.

How do I correct a payroll mistake?

Void or edit the affected check, re‑run payroll if required, and ensure tax liabilities adjust accordingly. If a filing already went out, file an amended return as appropriate.