QuickBooks Payroll allows you several options to pay bonuses to your employees like paying a bonus on a regular paycheck, on a separate paycheck, or pay your employees with a gift certificate. You can have this article handy for reference if you need additional information when creating bonus checks in QuickBooks Payroll.
Creating / Setup Bonus Checks In QuickBooks Payroll
With the end of financial year approaching, many organizations around the globe would be thinking of awarding their hard-working employees with better remuneration.
For many of these organizations, taking in parameters of employee performance and experience and calculating the amount of bonus to be circulated can be mind boggling. Creating each separate check and putting signature onto is will cost a lot of time and effort. With QuickBooks this problem can easily be solved.
With QuickBooks Payroll, you can either create a complete paycheck that contains the salary as well as bonus or create separate checks for bonuses. Bonuses are also subject to taxes.
This is why we must consider the various tax imposed on paying employees to be applicable on bonuses as well. These taxes are applicable on bonus payment despite the payment mode. You may choose to pay through bank account, credit card or paychecks.
With QuickBooks Payroll, the stored data can be used to calculate taxes. Though most of these taxes are normal and QB cannot calculate supplemental rate applicable on Federal taxes and state taxes that are also to be paid on bonuses.
How to Pay a bonus to the employee in QuickBooks?
A bonus referred to the compensation that is above the amount of payments mentioned as a base salary.
1. Adding a bonus on a regular paycheck
Before providing your employee the first bonus you are required to integrate the type of bonus type to the profile of an employee. If in the case when the employees have the bonus pay then you can record the payment via manual check instead of a direct deposit check.
How to add the bonus pay type to the employee profile in intuit online full-service payroll?
Here are the steps:
- Firstly choose the Employee option
- Hit on the Pay section and then hit on Edit button
- Now locate to show all pay types button to choose bonus
- Click on Ok
2. Adding the bonus to a paycheck
- Discover the payday option
- Choose the employee
- Write the amount in the bonus box
- Make and approve the payroll
- Add the Bonus to a paycheck.
What are supplemental wages?
Any wage that is given in addition to the normal wage of the employee is deemed as supplemental wage. These can include the tips, commissions, overtime payments, bonuses, etc.
These wages are not subjected to the same tax laws that regular wages are subjected to. Further, there is no necessity to pay taxes on supplemental wages and regular wages at the same time. A seven day period is given for tax payment on regular wages but the same isn’t true for taxes on supplemental wages.
How much is the Tax on Supplemental Wages?
There are a number of factors this percentage depends upon.
1. Condition One: Supplemental Wages less than 1 million USD
A flat rate on 25 % can be held on both the wages combined. You can also choose to pay the tax separately. This way you can pay later but the percentage of tax cut may differ from the fixed rate.
These rates are implemented by IRS. Also, many complicated calculations are involved in separately calculating the tax on these individual wages.
2. Condition Two: Supplemental Wages more than 1 million USD
On combined wages there can be a combined rate of 25 % but on supplemental wages more than 1 million USD tax has to be calculated separately.
This tax is to be paid at 35% on the amount exceeding 1 million USD. This way, a huge amount is saved from being taxed at a high rate, only the amount that supersedes 1 million USD is taxed.
How to create a separate bonus Cheque in QuickBooks?
You can pay a bonus to your employee on a separate paycheck in QuickBooks Desktop. Bonus cheques of the employee are not always linked to payroll runs thus you can cut discrete bonus cheques any time. In case you are making a bonus cheque individually from a standard paycheque then there is no requirement of setting up a pay type of bonus.
Below-mentioned is the list of steps to generate a separate bonus cheque:
- Locate the Employees option or Payroll menu
- Choose the drop-down named Run payroll
- After this hit on Bonus only
- Now discover the Run Payroll
- Find Bonus only page
- Hit on the below-given option:
- As gross pay: It is the remaining amount after payroll withholdings are wiped out
- As net pay: It is the total pay or the amount you create before payroll withholdings and other suitable deductions are excluded
- Hit on the Continue option
- Write the pay date
- Choose the checkbox that appears next to each employee to add in the bonus run.
- Fill in the bonus amount regarding each employee
- Write a message to display in the Memo field of the pay stub or cheque
- Choose edit option which appears near to payroll option
- After this verify the options you need and choose the Apply button; Payroll options contains only options suitable to the bonus
- Choose Preview payroll and then verify the payroll
- Click on the Submit Payroll option
- Choose Print cheques or Print pay stubs
- Once completed the payroll then choose Finish Payroll
How to record Bonus checks in QuickBooks online?
Once you issue a bonus payment, it’s mandatory to discover the expense that you have not yet posted an accrual, lessen the cash amount, and relieve the accrual. In case you accrued the expense, then you have to debit the accrual account for the payment amount. After this credit that cash amount so that you can easily balance the ledger
How to avoid paying tax on a bonus check?
Here are the tips you can follow to avoid paying taxes on the bonus check:
- Bonus Tax strategies
- Make a retirement contribution
- Contribution to a health saving account
- Donate to charity
- Pay medical expenses
- Request a non-financial bonus
Fixing Bonus Checks Related Issue in QuickBooks Payroll
There are taxes on the other forms of payments of supplemental wages. Tips are taxed along with trips commissioned by organizations and overpay is also subject to these taxes.
How to Pay Bonus in QuickBooks?
- From the top menu bar in QuickBooks Desktop, click on “Lists,” then “Payroll Item List.” Click on the “Payroll Item” button at the bottom of the screen and select “New.” Choose “Bonus” as the item type, give the item a name, and set the rate to the bonus amount.
- From the top menu bar in QuickBooks Desktop, click on “Employees,” then “Employee Center.” Select the employee who will receive the bonus and click on the “Payroll Info” tab. Click on the “Additions, Deductions and Company Contributions” section, and then click on the “Item Name” drop-down menu. Select the bonus item you created in Step 1.
- From the top menu bar in QuickBooks Desktop, click on “Employees,” then “Pay Employees.” Select the pay period for which you want to pay the bonus and click on “Continue.”
- Once you have entered all of the applicable pay for the employee, preview the paycheck by clicking on the “Preview Paycheck” button. If things are satisfactory, click on the “Print” button to print the paycheck.
- Once you have printed the paycheck, go to the employee’s profile and click on the “Transactions” tab. Find the paycheck you just printed and click on it to open it. In the “Paycheck Detail” section, click on the “Taxes and Net Pay” button, and then click on the “Preview” button. If everything looks correct, click on the “Record” button to record the bonus payment.
Why do I need to create a separate bonus paycheck instead of adding to a regular paycheck?
There can be several reasons to create a separate bonus check instead of adding to a regular paycheck:
💠 Turn off the direct deposit to search for the bonus.
💠 Your employee has accumulated $1,000,000 or more in extra salaries, and you are allowed to withhold federal taxes at 37%.
💠 Govern the tax treatment of incentives. Or withdrawing deductions from the savings plan.
💠 You’re paying off-cycle incentives. Not on a planned payday.
💠 Deliver a bonus check to the employee as a special occasion. Produce a separate bonus paycheck.
How to add the bonus pay type to the employee profile in QuickBooks Online Payroll?
Initially, select Workers and then choose Employees. Choose the Name of the employee. In the section of Employee details, select the pencil icon which is next to Pay. Choose the Add additional pay types and then choose Bonus. At last, hit done.
How to add the Bonus to a paycheck in QuickBooks Online Payroll?
In the beginning, select Workers and then choose Employees. Select the Run Payroll. Next, choose the employee and then enter the amount within the Bonus field. In the end, hit Preview and then Submit payroll.