Unless you run an all-volunteer operation, sooner or later, your employees are going to want to get paid. When that time comes, you face the daunting task of dealing with payroll, which is the name for all the financial records you have to keep for employees’ salaries, wages, bonuses, and deductions. This chapter explains how to pay yourself without payroll, how to record do-it-yourself payroll transactions, and how to record the payroll transactions processed by a payroll-service company.
If you run a one-person shop, like a sole proprietorship, partnership, or a small Sub-chapter S corporation, you can withdraw money from the company as compensation without fussing over payroll. But to take advantage of retirement savings options like a Simplified Employee Pension (SEP), you have to deal with special rules regarding eligible compensation. For sole proprietors and partners, all you have to do to determine your eligibility for a SEP is calculate your compensation, which is based on company net profits. However, a Subchapter S corporation has to pay you an actual salary for you to be eligible for a SEP plan.
If you’re one of the poor souls who has to deal with payroll, you can process payroll on your own by adding transactions to QuickBooks for your payroll checks and the payroll tax payments you make to federal and state government agencies. (The box on Preventing Payroll Migraines explains what you’re in for if you decide to do payroll on your own.)
But you ...