In this post we will show California employers how to use Payroll Mate software as an alternative to QuickBooks payroll and save hundreds of dollars each year in payroll processing fees. We will cover the different California payroll taxes and how they can be calculated using Payroll Mate.
Payroll Mate costs $99 per year, which is less than what some California employers pay each payroll run. Once payroll is processed inside Payroll Mate, users can utilize the QuickBooks export feature to transfer checks and other information to QuickBooks.
California has many different requirements when it comes to taxes and reports, and Payroll Mate will be a great program to accommodate every one of those needs. In Payroll Mate the user will be able to custom add any deductions and taxes that are not pre built in. They will be able to file the specific reports required by the California State Employment Development Department (EDD), as well as print checks, and do the W2’s.
Payroll Mate is a software that will automatically calculate the federal and state withholdings. These are built into the program, and the state of California is defined when you edit an employee. To do so, click on an employee, then click “edit”, a new window will come up called “modify employee”, click “next” until you get to the “General Information” window. There you will select the state of California. You will need to do that in order for Payroll Mate to calculate at the California rate. The rates vary from state to state. Proceed with modifying each employee.
The first California payroll tax that will have to be defined is the Unemployment Insurance (UI) which calculates up to 7,000 dollars, and has a rate of 3.4% for new employers. A new employer is anyone who has been running a business for 2-3 years. The other rates are available on the California State Government website. The Unemployment Tax is for anyone that is unemployed in an instance that is not because of their own fault. The employer pays this tax, it can be up to 6.1% or as low as 1.5 %. Payroll Mate will support Unemployment Insurance tax (UI), however the rates will have to be entered manually. First the employer must contact the EDD to get his specific rates. Start by opening up the software, and then go to “company” in the bottom left hand corner, then click on “State Tax Information”, there at the top you will enter the Unemployment Insurance rates, and also enter the wage base at 7,000.
Second is the Employment training tax (ETT), as of 2014 it has been set at 1% on the first 7,000 dollars. This tax is to ensure that California has a skilled work force; these are funds to train the employees, also paid by the employer. The Employment Training Tax (ETT) will have to be added into Payroll Mate manually. First open up the software, second click on “Company” (bottom left hand corner), third click on “Tax Categories”, fourth click “add”. Start by naming it accordingly. Add in the rate at 1% (Check for updates with the EDD), and enter the wage base at 7,000. Most important is to remember to change the “paid by” column to “employer” since this tax is paid by the employer and not the employee.
The third state tax is the State Disability (SDI). This tax is also at 1% and it includes the Disability insurance (DI), and the paid family leave (PFL). The SDI has the wage limit of 101,636 dollars per employee, per year, and an employee can only receive up to 1,075 dollars in DI/PFL benefits per week. This is paid to any employees that are unable to work because of work related injuries, child labor, taking care of an ill child/spouse/parents, and other serious reasons. Also in July, 2014, PFL program “will include time off to care for a seriously ill grandparent, grandchild, sibling, or parent-in-law”. This is deducted from the employee’s wages. This is a built in tax in the Payroll Mate software, however you will have to enter the rates. To do so, go into “company” on the bottom left hand corner, click on “State Tax Information”, then look all the way at the bottom and fix the first two fields stated as “employee rate” enter the rate at 1%. The wage base is at 101,636. (Ask about employer rates!).
The final tax is the California Personal Income Tax (PIT). This is based on wages paid, withholding allowances claimed, and payroll period. Most of the wages earned get California personal income tax withheld some examples are: salaries, commission, bonuses, also wages paid in non check/cash form such as lodging, food, and other compensations. This tax is paid by the employee, and it has no limit. As stated in the California employee handbook “employee’s calendar year total for PIT wages should agree with the amount reported on the employee’s federal Wage and Tax Statement”. The UI, ETT, SDI and the PIT reports are due quarterly on the Quarterly Contribution Return and Report of Wages California form. Even if there is nothing to be recorded as payroll, the employee is still responsible to file these forms. The dues dates are January 1, April 1, July 1, and October 1 of each year. The California Personal income tax is built in; however the rates do change by state. To make sure the right state is selected go into “employees” in the bottom left hand corner, select an employee by clicking on their name. Then click “edit” at the top. The “modify employee” wizard will come up, click “next” until you get to “general information”, there you will select the state of California. Click “next” seven times until you get to the “finish” button. Exiting out will not save the data. Once this is set up for each employee, the California PIT withholdings will come out of each of the employee’s checks.
After all of the tax categories have been created the user must apply them. In order to accomplish that, click on “employees” in the bottom left hand corner, choose an employee by clicking (highlighting) a name, click edit, and click “next” until the window says “Taxes”. Make sure the right boxes are checked off depending on the taxes that apply to this particular employee. Personal Income Tax (PIT) should always be checked, since this tax is applied to all incomes. Make sure to go through all of the employees in order for Payroll Mate to generate the right amounts taxed on each check. To make sure each employee is set up correctly, go to the bottom left hand corner to “checks”. Click “new” at the top, and create a check for each employee to be certain that these taxes are being taken out. In the check screen, first choose the right employee by finding their name in the pull down bar and then fill out the rest that applies. Once the checks have been created, Payroll Mate will generate reports that are mandatory for the employer to file. These will be filled by mail. To get to these forms click on “forms” in the bottom left hand corner, and then choose the form you need by simply clicking on it. Payroll Mate will generate the 940 (Annual FUTA report), it will generate 941 (quarterly report), 943 (agricultural report), and the 944 (annual federal tax return report). Keep in mind that all reports revolve around Pay Date not Pay Period. For example, when clicking on report “941”, and clicking “Preview” “Schedule B”, the form will report the checks from the pay date. The total liability of all three months (which has to match line 10 of the 941) will be at the bottom right corner of the form. Open up the software, second click on “Company” (bottom left hand corner), third click on “Tax Categories”, fourth click “add”, and fifth begin creating this category. Start by naming it accordingly, enter the rate (3.4 % for new business owners), however you should check with the EDD in order to get the correct percentage that applies to you, and in case of any updates. Then, enter the wage base which is at 7,000. Most important is to remember to change the “paid by” column to “employer” since this tax is paid by the employer and not the employee.
Once you are done processing payroll navigate to the QuickBooks export screen inside Payroll Mate, generate the IIF file and import inside QuickBooks. Before you can import IIF file into QuickBooks make sure the company you want to import the IIF file into is open. Once the IIF file gets successfully imported inside QuickBooks, you get a message from QuickBooks that the import was successful, the imported transactions (checks) will get reflected on the Check Register inside QuickBooks.
Too learn more about processing California payroll using Payroll Mate visit http://www.PayrollMate.com/ .