Payroll Item for Covid-19 Emergency Paid Sick Leave

Welcome to Community, @Brod.

I'll share the steps on how to set up the Emergency Paid Sick Leave or FFCRA in QuickBooks Desktop. You'll need to set up your expense accounts for the paid leave first. This is where you keep track the eligible wages to use towards tax credits later on. Then set up the payroll items to track your paid leave. Lastly, run your payroll. Let me walk you through the steps.

To create an expense account:

1. Go to the Lists menu, then select Chart of Accounts.
2. Scroll down towards the Account ▼ drop-down, then hit New.
3. Choose Expense, then Continue.
4. From the Account Type drop-down, tick Other Expense.
5. Give your expense account a name, such as COVID-19 Expenses, in the Name field, fill out all the relevant information, and click Save and Close.

After creating an account, set up a payroll items. Here's how:

1. Go to the Employees menu, then Manage Payroll Items, then select New Payroll Item.
2. Choose Custom Setup, then Next.
3. Pick Addition (Employee Loan, Mileage Reimbursement), then Next.
4. Give your pay type a name, such as National Paid Leave EE or National Paid Leave Family, then Next.
5. In the Expense account window, take COVID-19 Expenses (or whatever you named the expense account) and then Next. 
6. In the Tax tracking type window, pick out the paid leave type, such as National Paid Leave EE or National Paid Leave Family based on what you are setting up as the tax tracking type.
7. In the Taxes window, snap Next.
8. In the Calculate Based on Quantity window, tap Calculate this item based on Quantity, and then Next.
9. In the Default Rate and Limit window, set the rate for the following items. The National Paid Leave Employee limit is $5110 and the National Paid Leave Family is $2000.
10. Ensure the Limit Type is Annual, restart each year, and then click Finish.

After setting up the payroll item, set up a new tax item. This is use for tracking the tax credits.

1. Go to the Employees menu, then Manage Payroll Items, then select New Payroll Item.
2. Choose Custom Setup, then Next.
3. On the Payroll item type window, pick Other Tax, then Next.
4. On the Other Tax window, tap National Paid Leave Credit, then Next.
5. In the Name used in paychecks and payroll report window, enter National Paid Leave Credit in the text field, then Next.
6. In the Agency for company-paid liability window, take the agency you pay taxes too from the dropdown, pick out COVID-19 Expenses in the Liability account dropdown, and then COVID-19 Expenses (or whatever you named the expense account) in the Expense account drop-down, and then Next.
7. From the Taxable Compensation window, snap Next.
8. In the Pre-tax deductions window, select the item that will reduce wages for this tax. Then click Finish.

Once done, run your payroll and use this payroll item for your eligible employee. For more information about the setup, check out this guide: How to track paid leave and sick time for the coronavirus.

If you need help with claiming your tax credits, click this link to for the step-by-step instruction.

Feel welcome to message me anytime if you still have questions or concerns. I'm always here to assist you. Take care and have a wonderful rest of the week.