How to Add Deductions to a Payroll System
There are many steps involved in payroll processing such as figuring hours, paying wages and adding deductions. Many employers use a payroll system, such as Quickbooks or Ultipro, that automatically calculates the data entered, including deductions. For accurate calculation, the payroll person must properly enter the deductions in the payroll system.
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Instructions
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Enter federal taxes. To add federal taxes to the payroll system, enter the information stated on the employee's W-4 form. The most important entries are the employee's filing status and dependent amount. The system will automatically calculate his federal taxes based on IRS regulations.
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Enter state taxes by entering the employee's dependent amount and filing status. If your state charges state tax, refer to the employee's completed state tax form and enter the information. State tax rates vary by state and should be hard-coded in the system. Check with your state's department of labor to ensure you have the correct rate entered.
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Do not make individual employee entries for Social Security and Medicare taxes because the payroll system should be set up to deduct these taxes at the same rate for all employees each pay date. Simply ensure the correct rate is hard-coded in the system. For 2009, 6.2 percent of employees' wages up to the annual maximum go toward Social Security taxes; 1.45 percent of all earnings (no wage limit) go toward Medicare taxes.
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Add health benefits according to company rates. If the employer gives health benefits, such as medical and dental, code these benefits accordingly (e.g. MED and DEN) to the appropriate employees. Enter the employee's premium for each pay date. The system will automatically make the deduction on each payroll processing.
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Include retirement plans, such as 401(k). Generally, employers offer traditional 401(k)---pre-tax---and Roth 401k---post-tax. Use the employee's completed enrollment paperwork as your guide when setting up the contributions. Select the appropriate 401(k) and the percentage or fixed amount the employee wants deducted each pay period.
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Set up wage garnishments. Examine the wage garnishment paperwork. Child support garnishments are generally coded as such while a typical garnishment (e.g., for a credit card debt) is coded as a garnishment. Generally, the payroll system allows you to choose either a percentage amount or fixed amount. Enter the accompanying deduction amount stated on the garnishment paperwork. During payroll processing, print pre-processing reports to ensure you are accurately deducting the wage garnishment.
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Add wage deductions as a negative. Example: an employee was overpaid 8 regular hours on the prior pay period. He agreed to have the hours deducted from his next paycheck. Add the wage deduction as follows:
-8 regular
Ensure the dollar amount reflects a negative amount and equals the overpayment amount.
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