My payroll taxes are reporting wrong

jan_k · ‎December 10, 2018

My payroll taxes are reporting wrong in financial reports. Employee paid expenses are reported as payroll taxes instead of salaries. When I do a payroll item listing report I see that some payroll items are listed with both an expense account and a liability account. How do I add an expense account to the employee paid taxes and still have them with Liability Accounts? Or, is there a different way to set up how these payroll items are listed in financial reports?

qbteachmt · ‎December 10, 2018

This is the Payroll Expense math:

Gross Wages + Employer share of Taxes

Everything else you are asking is Cash Flow, not Expense. Everything else is a diversion of the employee's pay.

When you pay the Taxes and that includes the employee share, that is not expense. It is like this:

Gross Wages minus all deductions = take home

All deductions are held as Liability, until paid out on behalf of the employee.

"Employee paid expenses are reported as payroll taxes instead of salaries."

Look at your Salary values; do the math:

Net Takehome checks + all Tax checks and garnishment payouts should = Gross Payroll Expense.

View solution in original post

qbteachmt · ‎December 10, 2018

This is the Payroll Expense math:

Gross Wages + Employer share of Taxes

Everything else you are asking is Cash Flow, not Expense. Everything else is a diversion of the employee's pay.

When you pay the Taxes and that includes the employee share, that is not expense. It is like this:

Gross Wages minus all deductions = take home

All deductions are held as Liability, until paid out on behalf of the employee.

"Employee paid expenses are reported as payroll taxes instead of salaries."

Look at your Salary values; do the math:

Net Takehome checks + all Tax checks and garnishment payouts should = Gross Payroll Expense.

Anonymous · ‎December 10, 2018

Employee paid taxes should not appear on your P&L as they are not expenses to you in any way. If they are, edit these taxes from the payroll items list and choose a liability account for them, usually the default "Payroll Liabilities" account. Leave the expense account for employer taxes and the employer portion of SS and Medicare and any similar state taxes you may have.

jan_k · ‎December 10, 2018

The employee paid Medicare & SS are already listed as liability accounts MC-Employee and SS- Employee, but are still showing up in the P & L reports. I think the those two liability accounts may be set up incorrectly to have information for P & L reports to draw from them, but I don't know how to change that.

Anonymous · ‎December 10, 2018

Employee paid taxes can't show up on both the balance sheet and P&L. They only use one account, usually a liability account, and so can't appear on the P&L. If they are appearing on the P&L then the account set up on the item is wrong and they can't appear on the balance sheet.

jan_k · ‎December 10, 2018

They are both set up as liability accounts and are not expense accounts. They may very well be set up wrong, but I've looked at the Payroll Item Listing report and the Edit tab in the Chart of Accounts, and I can't figure it out. The director is upset because payroll tax expenses (figured at 7.65% of salaries) is double what it should be, and when we look at the line by line list of items that make up that expense it includes employee paid taxes.

Anonymous · ‎December 10, 2018

I don't know, though generally the company payroll tax expense will be a more than 7.65%. Include FUTA and SUTA and any other company paid tax in that.

What are you doing to confirm that employee paid taxes are included in the expense line? When I QuickZoom on a P&L expense, for example, the report I get does not include payroll items. So, I'd have no way to know what items those lines items are from. Ho do you tell?

pdevore · ‎December 10, 2018

@jan_k
You say " I think the those two liability accounts may be set up incorrectly to have information for P & L reports to draw from them, but I don't know how to change that."

Double check the Payroll Item in your Payroll Item List for Medicare and Social Security. It is a little confusing because although we all think of SS-Employee and SS-Employer as being two different payroll items, in the Payroll Item List they are both set up in a single set-up wizard even though they appear as two separate items in the Payroll Item list. Same for Medicare. So look at the set carefully.

On the first window you enter the Names for the Employer portion and the Employee portion of the tax.
On the 2nd window, be sure that both Account entries are LIABILITY accounts. The QB default account is "Payroll Liabilities" but it sounds like you may have set up a separate liability account for the Employee portion and another one for the Employee portion of the liability.
On the 3rd window, you enter the expense account for the Employer portion of the tax. That expense account only affects the posting of the Employer portion of the tax, since that is the only additional expense that you incur. The Employee portion is deducted from the Employee's paycheck, so that "expense" is actually reflected in your Payroll Expense account already, since it was included as a part of Gross Wages paid to the Employee.

So the Employee portion of SS and Medicare has only one account attached to it in the "set up"...the liability account that reflects the amount that was withheld from the Employee paycheck.
The Employer portion has a liability account AND an expense account associated with it since this is an additional expense that is paid by the Company.

On your P&L, you should see Gross Wages, and also the Employer portion of SS and Medicare being recorded.
On your Balance Sheet, in the liability account you should see both the Employee and Employer portions showing up....which should be double the amount that was withheld from the Employee paychecks.

Sorry to be so basic, but I hope this helps.

A201616- · ‎December 10, 2018

I am having this same problem. So on screen 2, the company and employee should be "payroll liability" what about the 3rd screen ' the expense' account? What do I enter on the 3rd screen for the expense account?

Anonymous · ‎December 10, 2018

It's odd you don't have an expense account as usually QB sets that up automatically.

In this case set it up yourself.

qbteachmt · ‎December 10, 2018

@A201616$ Your own topic is here:
<a rel="nofollow" target="_blank" href="https://community.intuit.com/questions/1601795-payroll-expenses-and-liability-not-showing-up-on-my-p...>
Let's answer in that one place for you. Thanks.

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My payroll taxes are reporting wrong