How to enter 3rd party payroll in Quick Books.

Hello there, @Miguel78.

You can create a journal entry to enter your employees' third-party payroll information. Let's first make sure to create the necessary expense accounts use to track your payroll expenses. Here's how:

1. Go to the Lists menu.
2. Choose Chart of Accounts.
3. Click the Account drop-down arrow.
4. Select New.
5. Pick Expense. 
6. Enter the account details.  
7. Click Save and Close. 

You can repeat the same steps to create all the necessary accounts for each payroll income, deduction, contribution and liabilities.  

Once completed. you can now create a journal entry to record your employees deduction, contribution and liabilities.

1. Go to the Company menu.
2. Select Make General Journal Entries.
3. Fill out the fields to create your journal entry.
4. Make sure your debits equal your credits when you’re done.
5. Click Save or Save & Close. 

Also, I'd recommend consulting with an accountant so you'd be guided in making you've assigned the accurate accounts. 

Keep me posted if you have other questions about tracking your income and expense transactions in QuickBooks. I'm always here to help.

@Miguel78 

If your 3rd party payroll app doesn't support QB, you may import the data as journal entries by using one of these importer tools.

https://transactionpro.grsm.io/qbd

https://partners.saasant.com/affiliate/idevaffiliate.php?id=5051_2

Thank you everybody for all your help. 

Okay, so how then do I record the payments made to the third-party firm that handles the payroll?  I have entered journal entries for the debits and credits, but where does it show that I actually paid for all the taxes to the payroll service?

I can share some information that can help you record your payroll transactions, @barocco.

If you've added your payroll transactions through journal entries or by writing a check, it can't affect your taxes or payroll taxes account. Check these articles for more information about recording paychecks made outside of QuickBooks: Set up manual payroll without a subscription in QuickBooks Desktop.

To show those items or accounts that you've recorded, you can run a payroll liability report. Refer to this article for more information about payroll items assigned to a liability account, deductions, and company contributions: Run payroll liability balances report.

To filter the report based on your needs, here's a guide on how to  customize payroll and employee reports.

I'm always here if you need further help in recording your transactions and or anything else. I'm always glad to help in any way I can. Have a great rest of the day!

MaryJoyD:  Thank you but I still cannot get the answer to my question. My clients uses QBO but uses an outside payroll service who pays the taxes and files the quarterly forms for the company.  QB advice is to set up both expense and liabilities accounts for wages, taxes, and tax liabilities; HOWEVER, the company does not pay those directly. They are paid by the payroll company.  How do I enter those payments? Why are they liabilities instead of expenses to the payroll service?  If I enter a pay check and deduct the taxes, the taxes show up as negative numbers. If I do journal entries for gross wages, taxes, and employer/employee taxes (as credits), how do I reduce the liabilities when the service deducts those amounts from the checking account?

Thanks for getting back to us, @barocco.

I'll share some information about recording a third-party payroll in QuickBooks. Record your gross wages, taxes, and employee taxes by creating a journal entry that offsets your bank account and your payroll expense or liability account.

For your payments, you can create an expense or a check using the payroll expense. This way, you can keep track of all your payroll liabilities and expense transactions in both expense and liabilities accounts you've created for payroll. 

Please check out this article below for your reference: Create a journal entry in QuickBooks Online.

If you're done recording, you can run the Profit and Loss report to view your payroll expenses. Just go Reports and then enter "Profit and Loss" to see it.

Here's a link to know the different reports: Reports included in your QuickBooks Online subscription.

Please let me know if you still have questions or concerns with payroll expenses or payments. I'll be around for you. Take care and have a wonderful rest of the week.

I think we are misunderstanding the issue here. The payroll service pays the taxes and then debits the bank account of the client.  That money is taken directly out of the bank account. If I enter debits and credits for gross salary, taxes, etc., how do I enter the money taken directly out of the bank account by the payroll company for all of these items?

Hi, @barocco. Thank you for reaching the Community. I’d be glad to help you fix this.

Some payroll services allow you to import paychecks directly into QuickBooks Online. If what you're using doesn't have this option, you can manually enter this payroll information.

I’d also suggest consulting your accountant to make sure its accuracy about these transactions.

Here's how to enter the payroll payments in QuickBooks Online:

First, you'll have to create these accounts for tracking:

• Payroll Expenses: Wages
• Payroll Expenses: Taxes
• Payroll Liabilities: Federal Taxes (941/944)
• Payroll Liabilities: Federal Unemployment (940)
• Payroll Liabilities: [State] SUI/ETT
• Payroll Liabilities: [State] PIT/SDI

Then, Enter the payroll paychecks into QuickBooks Online:

1. Get your employees' payroll pay stubs or a payroll report from your payroll service.
2. Select + New.
3. Select Journal Entry.
4. Under the Journal date, enter the paycheck date.
5. If you want to track the paycheck number, enter it in the Journal no. field.

For more information on how to manually track the payroll payments, please check out this article: Manually enter payroll paychecks in QuickBooks Online.

I'll be glad to help you if you have any other questions.​ Have a good day!

I understand the two JE's for the payroll outside of QB, and then entering individual checks without check numbers for each employee, using account "payroll clearing"  What account should the actual total net DD withdrawal be?

Ie. if I were using paychex flex and they took out the total net payroll withdrawal, what account is that?

Hello, heazim1. 

Thank you for reaching out to the Community. Let's create new accounts in your Chart of Accounts to track the bank account you used in Paychex flex. I'll show you how to do it: 

1. Select Expenses as the account type. 
2. In the Detail Type choose  Payroll Expenses.

Then we can create Journal entry. You can follow the steps above shared my colleague.   

Though, I highly suggest consulting your accountant or accounting professional for guidance on which account receives the debit and the credit side of the transaction. This is to ensure that the books are accurate for your business.

See this article for more information about adding  3rd party payroll in QuickBooks: Manually enter payroll paychecks in QuickBooks Online. 

Please know that I'm only a post away if you have any other issues or concerns. I'll be more than willing to assist. Have a good one!

I believe you enter the individual checks to each employee leaving check no blank.  Then when the one time withdrawal from the 3rd party shows up in the bank feed you match it to all of the employees checks together.  The JEs are to create the liability and to put each Employees check to payroll clearing which is in the JE as well as the taxes.

None of this QB advice is correct and I can't understand why a QB advisor cannot answer this question correctly.  You cannot enter a LIABILITY if you do not have a liability.  If you enter the employee payroll taxes (employee's portion of SS, MC, Fed Tax, State tax) as a liability, you'll forever show them as a liability because you're never going to "pay them back".  If your payroll company handles that process for you, as mine does, you have no liabilities.  They are all expenses.  You do not want these shown in an account for later that looks like you owe money to someone still when you don't.  

@macbuilthomes 

You can prepare the data as Journal Entry

@macbuilthomes 

When you withhold the employee's portion of FICA and federal and state income tax, you have both an expense and a liability because you owe that money to the state and the IRS.  It sits as a liability until you pay the state and IRS (depending on your withholding deposit schedule), at which time, it's no longer a liability.

Their company is not the one doing the withholding, the payroll company is.  They stated that they pay their 3rd party payroll company the amount of the wages plus the withholdings.  This is very common.  It is how we pay as well.  Our payroll company automatically the deducts the amounts of the employee wages, the employee witholdings, and the employer taxes.  We pay all of it to our payroll company at the time of each payroll check.

  If you have an employee whose net wages are $2000 and tax withholdings are around $500, and you pay this entire $2500 to your payroll company, the payroll company has the liability.  Everything you've paid is an expense.  If you show a liability, it will never go away, because you're never going to pay that liability back as it was paid in full already.

I use ADP and treat them just like a vendor doing ACH payments weekly. out of sight out of mind and nothing to track, just get the forms from ADP at the end of the year.

What about the amounts they do not take out of your checkbook.  Like the the Simple IRA decuction, and the HSA.   How do I record that so I can expense it, put in a liability account and then pay once a month?

digging around on ADP RUN I see QuickBooks is supported so I'm sure working with ADP RUN support and QuickBooks support you should be able to get a working procedure.  I only have simple payroll needs. no IRA or HSA

Hello there, @MikeTLive.

Still, you can create a journal entry to record or handle the amount. Here's how:

1. Go to the Company menu at the top. 
2. Select Make General Journal Entries. 
3. Set the date range.
4. Enter all the required details.
5. Click Save.

Also, I'd suggest consulting an accountant to make sure you'll be posting them to the correct accounts. If you're looking an accountant, you can follow the steps below.

1. Go to the Find-a-ProAdvisor website.
2. Enter the specific location, service you want them to help you, and your supported product.
3. The system will then automatically generate a ProAdvisor.

You'll want to check this article to learn more about manually run payroll in QuickBooks Desktop: Set up manual payroll without a subscription in QuickBooks Desktop.

Please let me know if you need more help by leaving a comment below, Korby.

This is my exact issue and I appreciate you explaining it this way.

Question: when there is a liability the payroll expenses are lower because the company holds the taxes until they are due. Thereby the Wages account doesnt reflect 2500 (per your example) but it reflects 2000. How do you account for that? Or are your wages just higher?

Thank you for saying this. I am in the same boat. I've been tasked to clean up the books for this company that hires a 3rd party payroll service and I wasn't sure if it was being recorded correctly. Should it all be expensed as "Payroll Expenses" or should their be subaccounts under Payroll Expenses for Wages and Taxes? 

Thank you for joining this thread, deannaldh.

In QuickBooks Online, you can have the Payroll Expenses as the parent account. Then, make the Wages and Taxes subaccounts.

To keep track of your payroll expenses, here's a link on what account to use: Learn how to create journal entries for paychecks you create outside of QuickBooks. It'll tell you what expense and liability account you need to use.

If you aren't sure about this, it's best to consult with your accountant. Doing this will ensure your books have accurate records. 

If you don't have an accountant, you can look for a certified QuickBooks Pro-Advisor. Please use this link as a guide: Find a ProAdvisor.

Stay in touch with me by commenting below if you have other concerns aside from your payroll expenses. Just leave a comment below and I'll get back to you.

Hey,

I'm just wondering if you ever figured this out? I'm having the same problem. The third party payroll company withdrawals everything (taxes & net pays) out and pays the taxes on our behalf. I have the journal entry balancing with the net amount payment but I can't figure out how to include the withdrawal for the tax portion. Any help would be great!