I recently migrated from Quickbooks Desktop Pro 2016 to Quickbooks online. I am a single person S-Corp. where I am both the employer and employee?
I’d like to understand if in my Chart of Accounts, Payroll Expense should align with Payroll Liabilities or is it simpler to keep it as it’s set up.
Payroll Expense: This is employee Payroll and Employee Payroll Taxes.
Company Contributions/Retirement: Both Employee & Employer contributions are falling under Retirement. This is for a Simple IRA. As an example, each month the Company Contribution is $60 while the employee contribution is $1,101.66. Should the employee contribution fall under a different account?
Taxes: This is for Employer Taxes (FUTA Employer, Medicare Employer, CA ETT, CA SUI Employer, Social Security Employer)
Wages: Gross Employee Pay.
I've got you covered, @krcroteau.
Thanks for sticking with us as you've moved to the online environment. I'm here to give some relevant details about how payroll transactions are posted in QuickBooks Online.
By default, all company contributions under the one category will go to the same account. Similarly, all employee taxes paid by the employers will go to the same account.
If you want to separate the account used for the company contributions and tax expenses, you can opt to categorize them to a new account. Make sure to first add a new one from the Chart of Accounts page.
To add new account:
To categorize company contributions to a different account:
Currently, the option to set up the Payroll Tax Liabilities to a different account is unavailable. You can use a journal entry to transfer the amount from one account to another.
For the accuracy of your books come tax time, please consult with an accountant before creating the entries. Here's an article for the detailed steps in creating journal entries:
I've also added an article you can refer to in the future:
In case you will need one, check out the links below for some QuickBooks Online video and Payroll article tutorials:
These should help answer your concerns for today.
If you have other questions in the future, feel free to drop by here again. I'll be around!
This doesn't answer my concerns! I'm a stockholder in Intuit and I'm VERY disappointed. Please read again!
I'm a 1 person S-Corp where I am the single employee. I just transferred from QB Desktop to QB Online.
Both my Employee & Employer Simple IRA contributions are falling under my Payroll Expense Retirement Account. I'm not sure if this is correct.
As an example, each month the Company Contribution or employer contribution is $60 while the employee contribution or deduction is $1,041.66 for a total of $1.101.66. I think something is wrong with my payroll setup, what account should the employee contribution / deduction fall under? It seems it's going to Payroll Liabilities. The Total $1,101.66 transaction each month is initiated from Vanguard.
Greatly appreciate it. As a small business owner who some years makes less than $50k I love to learn. Thanks.
You have this running in Two Places, now. That makes it harder for us, volunteers and your Peer users, to be able to help.
It isn't clear which part of GAAP you are worried about.
As for the payroll issue, I really cannot put the same info in multiple places. Be sure to keep topics in One Place, so that you, and others that also try to help, can see what else has already been covered.
And please read where you also asked, and I have been giving detailed info, here:
Hi Kevin -
I am also a single person S Corp, employee/employer, and have done GAAP accounting 30 years. Just switched my accounting system after a year on QBO and a decade before that using QBDT and I also contribute to an IRA, where I parked multiple previous 401k accounts over a decade ago but differ in that I only do an employer contribution since it is all my money anyway. I only contribute once a year lump sum, mostly cuz that is when I get around to doing that so I'm not one to give investment advice but does make accounting simpler with less transactions. Looks like you are using QB payroll which I am definitely not a fan of but maybe no issue to you. Since I know how to do my own accounting, I do not like having to work around a system that I find not user-friendly. Regarding your breakdown below, might be some confusion there. I do not like the terms Wages or Payroll Expense, but below, those are both the exact same item. Employee payroll + employee payroll taxes = Wages, which is employee gross pay and to me that is Labor expense on my P&L. That is my largest cost and that is the number that my IRA and payroll taxes are computed from. Employer taxes are a separate line item on P&L since they are an expense not paid to me but to tax agencies. IRA portion paid by company is a third expense. Employee contributions would come out of Gross pay above, so would not show as expense. So on my P&L Income statement a minimum I want to be able to see:
- Labor cost
- Payroll tax
- IRA - ER $
= Net Profit
Easy enough, but totally up to me (or you), if you want to see more detail. For example, I could have separate accounts for FICA, splitting SS vs. Medicare, FUTA, SUI and ETT if I wanted to do. One reason would be to easily check if amounts are correct. For example, since I know FICA is 7.65% of my Gross pay, I could easily compute that amount to confirm QB payroll did it right. I could further split FICA into SS @ 6.20% and Medicare at 1.45% if I wanted to see that split up. One reason might be to confirm that when I hit the annual limit of ~ $128k, to confirm that 6.2 SS stops being paid since then I only pay the 1.45% until my pay hits $200k and I owe another .9% for more Medicare. I have done both ways and there are pros and cons, but you can choose.
Getting back to your specific question regarding payroll liability accounts. Those accounts are the other side of the entries above and are temporary accounts where those amounts are computed and accumulated until they are paid on your behalf (or by you manually) to tax agencies and IRA. So the split is a bit different as you will see on your bank statement these amounts paid in cash.
Net pay to you
Payroll taxes - EE and ER
IRA deposits - EE and ER
The latter two categories are paid to the same entities, so they are sent together but are already split into EE and ER so is no problem with them getting mixed together or anything, however, if you wanted to see them in separate accounts as line items on balance sheet, you could split up.
So there is not really a better or worse way to choose, it is all a matter of preference on details. Have seen and done many ways since I train small biz owners on accounting, so is all your call.