Payroll tax expense question using QB Online for payroll

I can help share insights about the Cash accounting method, userkdavis.

On Cash basis accounting, QuickBooks recognizes the unemployment taxes on the date it was deposited in federal and State governments. 

To learn more about the difference between cash and accrual basis of accounting, refer to this article: Choose between cash and accrual accounting methods in reports.

Feel free to leave a message below if you have more questions. The Community is always here to help. Stay safe and well!

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@GlinetteC wrote:

I can help share insights about the Cash accounting method, userkdavis.

 

On Cash basis accounting, QuickBooks recognizes the unemployment taxes on the date it was deposited in federal and State governments. 

 

To learn more about the difference between cash and accrual basis of accounting, refer to this article: Choose between cash and accrual accounting methods in reports.

 

Feel free to leave a message below if you have more questions. The Community is always here to help. Stay safe and well!

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I'm confused then.  Looking back at August 2022, the first month of my company's business, the cash basis and accrual basis P&L both show the same amount of unemployment tax expense.  However, the unemployment taxes were not deposited with the federal and state governments until October.  Why does my cash basis P&L show unemployment tax expense in August when it was not paid to the government until October?

Hi there, userkdavis.

I can add some clarifications why the Unemployment Tax expense appears on the Profit and Loss report in the Cash basis method.

The cash method counts income or expenses only once you get a payment or pay a bill. If your paychecks and tax payment dates were made in August in QuickBooks Online. That's why the amount will still appear in the Cash method.

Here's another example you can review. In August, you send out a $1000 invoice, with a sales tax rate of 6%, for a grand total of $1060. You receive a $424 payment in August, and the remaining $636 in September.

• With cash basis, you owe two sales tax payments, $424 for August and $636 for September, because you received payments in both August and September.
• With accrual basis, you owe one sales tax payment of $60 in August, because you invoiced your customer in August.

You can browse again this article to give you a complete explanation: Learn more about the difference between Cash and Accrual methods and how to change between the two. It includes the example scenario I've shared above.

If you think it shouldn't appear on the Cash Basis method, you can request a payroll correction. To do so, I recommend contacting our QuickBooks Live Team so they can correct your paycheck for you.

Keep me posted if you have additional payroll concerns. I'm always right here to help you.

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@MaryLandT wrote:

Hi there, userkdavis.

 

I can add some clarifications why the Unemployment Tax expense appears on the Profit and Loss report in the Cash basis method.

 

The cash method counts income or expenses only once you get a payment or pay a bill. If your paychecks and tax payment dates were made in August in QuickBooks Online. That's why the amount will still appear in the Cash method.

 

Here's another example you can review. In August, you send out a $1000 invoice, with a sales tax rate of 6%, for a grand total of $1060. You receive a $424 payment in August, and the remaining $636 in September.

 

• With cash basis, you owe two sales tax payments, $424 for August and $636 for September, because you received payments in both August and September.
• With accrual basis, you owe one sales tax payment of $60 in August, because you invoiced your customer in August.

 

You can browse again this article to give you a complete explanation: Learn more about the difference between Cash and Accrual methods and how to change between the two. It includes the example scenario I've shared above.

 

If you think it shouldn't appear on the Cash Basis method, you can request a payroll correction. To do so, I recommend contacting our QuickBooks Live Team can correct your paycheck for you.

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I understand the difference between cash basis and accrual basis accounting.  The problem is that QB is showing unemployment taxes that were paid in October as an expense on August cash basis financial statements.  This is incorrect according to everything I know about cash basis accounting and the replies I've received to my question.  Perhaps I will need to talk to a QB Live Team person.