How to Set Up Worker Compensation in QuickBooks Desktop

Let us first understand the meaning of workers’ compensation. Workers’ compensation is an insurance arrangement mandated by the government that pays the employee in case of injury while working or during employment. It provides wage replacement as well as medical benefits to the employees. In the below write-up, we will try to understand the procedure of setting up of worker compensation account in QuickBooks Desktop.

Steps to Set Up Workers’ Compensation in QuickBooks Desktop

If you’re a U.S.-based business using QuickBooks Desktop, it’s important to set up Workers’ Compensation correctly to ensure proper payroll tracking and compliance. Here’s how to create the payroll item, apply it to your current employees, and set it as the default for new ones.

Step 1: Turning on the worker’s compensation

• First of all, you need to go to Edit > choose Preferences > Payroll & Employees > Company Preferences.
• Now in the second step, choose Worker’s Compensation > tick on the Track Workers Comp checkbox.
• After that, you need to tick on the “Display message to assign codes” checkbox and also on the “Exclude overtime premium from Workers comp calculation” and then click on OK.

Step 2: Create a Workers’ Compensation Payroll Item

• Go to Lists and choose Payroll Item List.
• Select the Payroll Item drop-down, then click New.
• On the Payroll Item Type screen, choose Other Tax, then click Next.
• On the Other Tax screen, select Tax is paid by the company, then click Next.
• When prompted for a name, enter something like “Workers’ Comp” for easy recognition, then click Next.
• On the Agency for company-paid liability screen, choose the appropriate vendor or agency that you pay Workers’ Comp to.
• If it’s not listed, click Add New to create one.
• You can use the default accounts or select custom accounts you’ve already created to track Workers’ Comp expenses, then click Next.
• On the Tax tracking type screen, leave it set to None, then click Next.
• Enter the default rate and limit for your Workers’ Comp:
• Confirm your rate with your state’s Workers’ Compensation agency.
• Click Next.
• On the Taxable Compensation screen, check all applicable payroll items you want Workers’ Comp applied to.
• Click Finish.

Step 3: Add the Workers’ Compensation Item to Existing Employees

• Go to Employees, then choose Employee Center.
• Double-click an employee’s name to open their profile.
• Click the Payroll Info tab, then select Taxes (or Taxes and TD1, depending on your version).
• Under the first available row in the Item Name column, select the Workers’ Comp item you just created.
• Click OK, then OK again to save.
• Repeat these steps for each current employee.

Step 4: Set Workers’ Compensation as the Default for New Employees

• Go to Edit, then choose Preferences.
• Select Payroll & Employees, then go to the Company Preferences tab.
• Click Employee Defaults, then choose Taxes.
• In the first row, under Item Name, select the Workers’ Compensation item you created.
• Click OK, then OK again to save and exit.

Read More: How to Cancel a Direct Deposit in QuickBooks Desktop

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