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Cynthia56
Level 1

Payroll entries with no taxes filed till year end

My organization uses an outside payroll service. We are a new startup non profit organization. The payroll company did not file any of the taxes till the end of December. My payroll started in July 2020, but taxes were not paid and filed till end of December. I had accounted for the ACH payments by using a QB check online, (as my bank account is tied into QBO) but created a tax liability account to split the payments so that net income would show as the payment to the employee. I need to do journal entries to clear out the liability account and show the payments as an expense. I want to debit the payroll expense account now, but a credit to the payroll liability account does not make sense because it would overstate the liability. If I debit the liability account, then what would the credit entries be since "cash" has already technically been the "credit" entry? Thank you.

 

Cynthia

7 Comments 7
GlinetteC
Moderator

Payroll entries with no taxes filed till year end

Thanks for reaching out, Cynthia56. I'm here to lend a hand.

 

You're on the right track. I'll walk you through how to create a Journal Entry.

 

Here are the steps:

 

  1. Click on + New and select Journal entry.
  2. On the first line, select an account from the Account field. Depending on if you need to debit or credit the account, enter the amount in the correct column.
  3. On the next line, select the other account you're moving money to or from. Depending on if you entered a debit or credit on the first line, enter the same amount in the opposite column.
  4. Check the amounts - you should have the same amount in the Credit column on one line and the Debit column on the other. This means the accounts are in balance.
  5. Enter information in the memo section so you know why you made the journal entry.
  6. Select Save and close.

Moreover, I highly suggest consulting your accountant for guidance on which account receives the debit and credit side of the transaction. This is to ensure the accuracy of your books. 

 

Please let me know if there's anything else I can help you with.

Cynthia56
Level 1

Payroll entries with no taxes filed till year end

Believe it or not, I know how to do journal entries as I have a Bachelor's degree in Accounting and work as an Accountant. That's not the problem. Every time I try to follow the Quickbooks version of what to do with the payroll entries, I cannot reconcile. I KNOW that debits have to equal the credits. Following the QB online instructions is causing my reconciliation to not be in balance. My problem with this goes back several months into 2020: Here is the full problem and I'm going to use January 2011 as an example.

 

I work as a volunteer for a new startup non profit organization with only 2 employees. I am the Treasurer. One employee's salary is $725.00 and the other salary is $500.00. Net pay for both is $1,024.14 and is debited from our checking account. The employer and employee taxes comes as a separate line item debited to our checking as 294.57.  Here are the entries I made:

 

Employee 1 salary (debit)        725.00

Employee 2 salary (debit)        500.00

Employer SS  (debit)                  75.95

Employer Medicare (debit)         17.76

               Federal Tax    (cr)                                            85.00

               Employee SS  (cr)                                           75.95

               Employer SS  (cr)                                            75.95

               Employer Med (cr)                                           17.76

               Employee Med (cr)                                           17.76

               State tax   (cr)                                                   16.15

               County Tax (cr)                                                    6.00

               Cash (bank: net pay empl 1)  (cr)                     584.54

               Cash (bank: net pay empl 2) (cr)                      439.60

 

So I had "excluded" those debited entries when it came through the online banking on QBO and made these journal entries instead. This causes my reconciliation to be off exactly by the amount of the taxes of 294.57. Should I remove the line of 294.57 from "Excluded" and put it back? Should I classify it to the Payroll taxes payable account?

 

Thank you in advance.

 

 

MaryLandT
Moderator

Payroll entries with no taxes filed till year end

Let me share some insights to ensure those journal entries are classified correctly, Cynthia56.

 

QuickBooks Online lets you track paychecks you've processed outside our system.

 

To know how amounts are reported, check out this link for instructions and detailed information: Manually enter payroll paychecks in QuickBooks Online. It guides you on how to debit and credit your accounts.

 

Let me know if you need additional information about this by commenting below. I'll be right here to provide the information you need.

Cynthia56
Level 1

Payroll entries with no taxes filed till year end

MaryLandT, that is exactly the page I've been following and replicating.

Catherine_B
QuickBooks Team

Payroll entries with no taxes filed till year end

Hello there, Cynthia56.

 

The excluded transaction can be the cause of the difference when reconciling the account. You can add it to your register to balance the amounts. Here's how: 

 

  1. Go to the Transactions or Banking menu and then Banking.
  2. Select the bank and click the Excluded tab.
  3. Look for the amount and click Undo.
  4. The transaction is moved to the For Review tab, just click Confirm.

Then, you can reconcile the account again including the added transaction. For more details in handling your accounts, you can check out this link: Reconcile an account in QuickBooks Online.

 

Let me know if you have other questions. Take care!

Cynthia56
Level 1

Payroll entries with no taxes filed till year end

Catherine B, I did that. Now should that amount be classified as a payroll liability? The amount is the sum of all employee and employer expenses.

DivinaMercy_N
QuickBooks Team

Payroll entries with no taxes filed till year end

Thank you for getting back here, @Cynthia56.

 

Let's check carefully if you already have recorded a payroll tax payment for the entry. If none, you'll have to record first. You can't add directly to the payroll accounts without using the Payroll feature as it will not be recorded when you generate tax reports or tax forms. 

 

For additional reference, please see this article: Set up Payroll account preferences.

 

I've also added a helpful source that helps you set up and process payroll in QuickBooks. To get started, please visit our Payroll hub

 

Let me know if you need further assistance with this and post a comment below. I'm always here to help. Have a good one. 

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