Add deduction to invoice

Hi there - I am a sole-proprietor and am on a short-term contract with a client that automatically deducts CPP and EI from their payments. (I submit an online timesheet and then they pay me for my time and HST minus the CPP and EI deductions). What is the best way to record this in QuickBooks? Should I create an invoice for each time period and treat the deductions as discounts? All of my other clients follow a normal invoicing process so I'm hoping I don't need to setup payroll. 

Thank you in advance for your advice.

Answer

Hello andrew.hoad-redd,

Thanks for checking in to the Community.

Usually, if you need to provide a year end form (T4) and report payroll tax, then you'll have to use the payroll feature in QuickBooks Online (QBO). If not, you can add the client as a customer in QBO.

To set up CPP and EI for employees:

  1. Click on Employees tab.
  2. Click on Turn on payroll.
  3. Click on Add an employee.
  4. Enter the information needed, under question no.1 for tax withholding's click on Enter TD1 form.
  5. Click on Done.

If you're setting the client as a customer, you'll have to add a service item for CPP and EI in the products and services with an expense account under the income account type.

To create a service item for CPP and EI:

  1. Click on the Gear Icon.
  2. Click on Products and Services.
  3. Click on Add.
  4. Choose Service type.
  5. Under Sales information choose an expense account in the income account drop down.
  6. Click on Save and close.

Once you create an invoice, choose the service item for CPP and EI in the second line item and enter a negative amount for the deduction.

However, I suggest you contact your accountant to provide more information on how you can track the CPP and EI for your clients.

Here's a handy article that you can check about employee deduction and company contributions: https://community.intuit.com/articles/1771560

Let me know if you have other questions. I'm just a comment away. 

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