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    Set up a payroll item for Washington's Labor and Industries (L&I) tax

    Article ID: 1000232

    Overview

    Washington's Labor and Industries (L&I) tax is a payroll tax generally paid by both the company and employee. It is based on hours worked with different rates for different occupations. In QuickBooks, two items are available to calculate the L&I payroll tax: one item for the company contribution and one item for the employee deduction. This article explains how to set them up.

    Expected Outcome

    You will set up QuickBooks to calculate, track and remit Washington L&I tax.

    Details

    You will set up QuickBooks to calculate, track and remit Washington L&I tax.

    Although Washington L&I tax is not paid or filed by Assisted Payroll service, Assisted Payroll customers can use these steps to track L&I and create a liability to pay.

    Starting August 2013, the state requires that L & I be electronically filed and paid. Employers who would like to opt out of this mandate will need to contact the state agency directly.

    For more information about Washington L & I payments and rates contact the state or see the following state website Washington State Department of Labor & Industries.

    To set up an company contribution item for Washington L&I tax:

    In QuickBooks, choose Lists > Payroll Item List. Click Payroll Item on the lower left and select New, then Custom Setup.

    Choose Company Contribution and click Next.

    Name the payroll item and click Next.

    Enter the agency name and account number. Select the accounts you want to affect in your Chart of Accounts. Click Next.

    Select the Tax Tracking Type as None. Click Next.

    In the Taxes window, be sure no taxes are selected. Click Next.

    In the Calculate based on Quantity window, select Calculate the item based on hours and click Next.

    Enter the company-paid rate per hour for your company.

    If the amount is different for each employee, leave the amount blank. You can enter individual rates later when you add the item to each employee's payroll information. (You must enter this rate in the employee profile or the Washing L&I tax will not be calculated on the employee's paycheck.)

    Click Finish.

    Set up a payment schedule for Washington L&I tax.

    To set up an employee deduction item for Washington L&I tax:

    In QuickBooks, choose Lists > Payroll Item List. Click Payroll Item on the lower left and select New.

    Choose Deduction and click Next.

    Name the payroll item and click Next.

    Enter the agency name and account number. Select the accounts you want to affect in your Chart of Accounts. Click Next.

    Select the Tax Tracking Type as None. Click Next.

    In the Taxes window, be sure no taxes are selected. Click Next.

    In the Calculate based on Quantity window,select Calculate the item based on hoursand click Next.

    If the employee is paid on commission, this payroll item must be set to calculate based on quantity. Enter the number of hours under the quantity field, in other payroll items on the paycheck.

    In the Gross vs. Net window,select Net pay and click Next.

    In the Default rate and limit window, leave the rate as $0.00. You must enter this information in the employee record under Payroll and Compensation information. (If you don't, the Washington L&I tax will not be calculated on the employee's paycheck.)

    Add the payroll items you created to the employee profile under Additions, Deductions and Company Contributions on the Payroll and Compensation Info tab so they appear on every paycheck.

    When you create a paycheck, the system applies the tax rate to hours worked for the employee.

    QuickBooks will not automatically exclude any earnings items from the payroll item calculation. If you need to exclude pay, you must manually modify the paycheck.

    3 comments

    Tom2/15/2013

    QuickBooks does not allow you to exclude Holiday pay from the WA L&I/Works Comp liability. It has to be done manually on the paycheck detail before printing.

    Reply

    Susan2/18/2013

    Hi Tom,

    Thanks for your comment, I have updated the article to clarify excluding pay if necessary.

    Dan4/9/2013

    This article gets most of it right and will work fine if the business has only been assigned one rate category. The rate is the same for any employee so the default CAN be filled with the current year's rates and used to populate employee records. If the business is assigned more than one rate category, then there must be a wage payroll item for each category. The tricky issue is if any employee works in more than one category, then instead of choosing hours you must choose quantity (in the calculate based on quantity window) and manually enter the totals for each category when processing paychecks. Not elegant but workable. It would be nice if there was a way to link a wage payroll item with a specific L & I category.

    Reply

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