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Level 1

My company uses a 3rd party to pay payroll taxes. How do I record these?

The company that I work for outsources their payroll liabilities only.

Payroll checks are done within QuickBooks, and liabilities are paid for by Gusto, which we then send checks to. 

I have Gusto set up in a payroll expense account, however, I cannot for the life of me seem to figure out this situation.

I am trying to record past payroll liability payments so when I go into the Payroll Center and pay a liability - it decreases the bank account when those liabilities were already paid through the payments made to Gusto.

How can I mark those liabilities as being paid?

If I don't mark them as paid then my payroll liability account balance is sky high. 

Any help would be appreciated because I just can't seem to wrap my head around this one...

Thanks!

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Best answer 10-15-2018

Accepted Solutions
Level 15

"I have Gusto set up in a payroll expense account, howeve...

"I have Gusto set up in a payroll expense account, however,"

That is a Payee Name; not an Account name. And paying Liabilities is not an Expense event. It is clearing the liabilities, which reflect expenses already accrued, so that is not new expense, but Cash Flow.

"I am trying to record past payroll liability payments so when I go into the Payroll Center and pay a liability - it decreases the bank account when those liabilities were already paid through the payments made to Gusto."

Use a Clearing Bank account. You didn't really Pay Liability to Gusto; you sent them Funds = like an Escrow process. That is a transfer from Checking to Payroll Clearing Bank. Then, you use the Pay Liability function to Pay Liability "from" the Payroll Clearing Bank as if you issued a real check. You can even name your Payroll Clearing Bank = Gusto Escrow.

If you send them only what they pay on your behalf, your Payroll Clearing Bank should now show 0 balance. That means you Reconcile it to 0, to prove you Confirmed it is done this cycle.

View solution in original post

4 Comments
Level 15

"I have Gusto set up in a payroll expense account, howeve...

"I have Gusto set up in a payroll expense account, however,"

That is a Payee Name; not an Account name. And paying Liabilities is not an Expense event. It is clearing the liabilities, which reflect expenses already accrued, so that is not new expense, but Cash Flow.

"I am trying to record past payroll liability payments so when I go into the Payroll Center and pay a liability - it decreases the bank account when those liabilities were already paid through the payments made to Gusto."

Use a Clearing Bank account. You didn't really Pay Liability to Gusto; you sent them Funds = like an Escrow process. That is a transfer from Checking to Payroll Clearing Bank. Then, you use the Pay Liability function to Pay Liability "from" the Payroll Clearing Bank as if you issued a real check. You can even name your Payroll Clearing Bank = Gusto Escrow.

If you send them only what they pay on your behalf, your Payroll Clearing Bank should now show 0 balance. That means you Reconcile it to 0, to prove you Confirmed it is done this cycle.

View solution in original post

Level 1

You are a lifesaver! Thank you!

You are a lifesaver! Thank you!
Level 15

Glad to help.

Glad to help.
Level 3

Re: My company uses a 3rd party to pay payroll taxes. How do I record these?

I have used Gusto payroll since 2015 (was Zen Payroll then) and have 20 clients who also use Gusto. Gusto connects to QBO very easily.  I would highly recommend you take advantage of the system functionality you are already paying for.  You should not need to write any checks to anyone since Gusto does Direct Deposit for employees and pays payroll taxes for you electronically and easily generates your W-2's and 1099's that employees can access online anytime same as pay stubs.

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