Payroll isn’t something most business owners think about every day, that is, until a notice arrives, a report doesn’t tie out, or an employee flags an issue with their W-2.
The good news is that with a few proactive reviews and the right setup in QuickBooks, payroll can stay accurate and far less stressful all year long.
Whether you’re settling into a new year or simply looking to tighten up your processes, these payroll best practices can help you stay organized, avoid common errors, and feel more confident in your reporting.
One of the simplest ways to prevent payroll problems is to keep foundational information current. In QuickBooks Online Payroll, this means regularly reviewing your company details as well as employee data like names, Social Security numbers, addresses, and tax withholding elections.
If it’s been a while since you last reviewed this information, running an Employee Details report can be a helpful starting point. This report allows you to scan everything in one place, making it easier to spot outdated addresses, incorrect filing statuses, or missing data. Saving a copy for your records is also a smart habit.
Keeping this information accurate supports cleaner payroll runs and smoother tax filings later on.
Payroll reconciliation doesn’t have to be complicated, but it does take a bit of attention. A practical approach is to run a Payroll Summary report and compare it to your wage expense, payroll tax expense, and payroll liability accounts on the balance sheet.
As you review, look for items that don’t make sense such as duplicate checks, unexpected withholding amounts, or benefits that were coded incorrectly. These discrepancies are often easier to fix sooner rather than later, especially before reports are finalized or filings are submitted.
If you’ve changed payroll systems, moved from QuickBooks Desktop to Online, or made midyear adjustments, this step becomes even more valuable.
Fringe benefits are another area where payroll errors can surface. Items such as retirement plan matching, HSA contributions, group-term life insurance, personal use of a company vehicle, and shareholder health insurance all require specific payroll treatment.
In QuickBooks Online, fringe benefits are managed through payroll pay types. Navigating to Payroll > Employees > Edit Pay Types allows you to review what’s already set up and add anything that may be missing.
Taking time to review these items helps confirm that they’re being included (or excluded) from taxes correctly and that they appear in the right places on employee forms.
For S corporation owners with more than 2% ownership, shareholder health insurance is a frequent source of confusion. QuickBooks simplifies this by offering a dedicated S Corp Owner Health Insurance pay type.
Once this pay type is added, it’s important to assign it to the applicable shareholders. If an employee isn’t assigned to the pay type, it won’t be available when payroll is processed.
The insurance amount can be entered in advance or added at the time payroll is run. Some businesses include it on a regular paycheck, while others prefer to process a fringe-benefit-only payroll to capture multiple adjustments at once. Either option works, as long as the amounts flow correctly to Box 1 and Box 14 of the W-2 and are not subject to Social Security or Medicare taxes.
Payroll taxes tend to run quietly in the background, which makes them easy to overlook. Inside the Payroll Center, reviewing Payroll Taxes > Payments provides a clear picture of what’s scheduled and what’s already been paid.
You may also notice a payroll tax holding account on your balance sheet. A quick comparison between this account and upcoming tax payments can confirm that everything aligns as expected.
Catching issues here can help avoid amended filings or surprise notices down the road.
Running payroll reports isn’t just a year-end task. It’s a useful habit throughout the year. Reports such as payroll summaries, tax liability reports, and employee detail reports provide helpful checkpoints and documentation.
Previewing employee forms when they’re available and saving copies of key payroll reports gives you a reliable reference if questions come up later, whether from employees, tax agencies, or advisors.
Payroll accuracy is rarely about one big fix. It’s usually the result of consistent reviews, thoughtful setup, and catching small issues before they snowball. By periodically reviewing employee data, reconciling payroll accounts, confirming benefit setups, and saving reports, you can keep payroll running smoothly and with fewer surprises.
And when questions come up, especially around specialized items like shareholder benefits, having a trusted advisor can make all the difference.
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