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    QuickBooks Online Guide · Payroll

    How to use QuickBooks Online for payroll

    QuickBooks Online Payroll handles federal taxes, state filings, direct deposit, and W-2s — and, done right, feeds labor cost straight into job costing. Here's how to configure it for a Washington construction or small-business employer.

    Who this is for: Washington employers running QBO Payroll Core, Premium, or Elite — especially construction firms that need labor cost on Projects.

    Step-by-step

    1. 1. Choose the right payroll tier

      Core covers taxes and direct deposit. Premium adds workers' comp admin and same-day direct deposit. Elite adds a personal HR advisor and tax penalty protection. For construction with job costing and WC, Premium is usually the floor.

    2. 2. Register with WA state agencies before your first payroll

      You need a WA UBI number, Employment Security account (ESD), L&I (workers' comp) account, and Paid Family & Medical Leave (PFML) enrollment. QBO can't file WA state payroll taxes without these account numbers.

    3. 3. Set up the company payroll settings

      In Payroll › Settings, enter federal EIN, state accounts, pay schedule, direct deposit bank, and default GL accounts. Map wage, tax, and net-pay accounts so payroll journal entries hit the right lines automatically.

    4. 4. Add employees with W-4, WA L&I risk class, and pay rates

      For each employee, enter W-4 info, WA L&I risk classification code (this drives workers' comp premium), pay rate, and deductions (health, retirement). Make employees time-trackable so timesheets flow to payroll.

    5. 5. Turn on job-costed labor

      In Payroll › Preferences, enable 'Track labor cost by Project.' When employees enter time against a Project + service item, payroll allocates gross wages, employer taxes, and workers' comp to that Project automatically.

    6. 6. Run payroll on schedule

      Approve timesheets, review the payroll preview (gross, taxes, net, employer cost), and submit. QBO handles direct deposit, federal deposits, and WA state filings (ESD, L&I, PFML) on your behalf.

    7. 7. Reconcile payroll monthly

      Each month-end, reconcile the payroll wages/taxes to the P&L, confirm agency payments cleared the bank, and tie out the payroll liability accounts to zero (or the next scheduled payment).

    Pro tips

    • Set up direct deposit for tax payments too — no more missed federal deposits.
    • Add owner/officer as an employee only if the entity type requires it (S-corp) — otherwise use owner draws.
    • Attach the L&I risk class documentation to each employee so audits are painless.
    • Run a payroll summary report at year-end and compare to W-3 totals before filing.

    Common pitfalls

    • Starting payroll before WA state accounts are registered — QBO can't file, and you accrue penalties.
    • Wrong L&I risk class — under-reports workers' comp premium and triggers an L&I audit.
    • Not enabling job costing before the first payroll — historical labor won't be on Projects.
    • Paying subcontractors through payroll — subs should be on 1099-NEC, not W-2.

    Frequently asked questions

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