Third Party Payroll Deductions

hm4 · ‎January 07, 2019

We use ADP for our payroll. When we enter the payroll information into QuickBooks (QB), we have a line for the Salary Account, a line for the Employee Withholdings Account, and then do a complete separate entry for the Employer Liabilities per employee (which is a vendor).

We recently acquired health insurance and need to do payroll deductions for some of the employees (vendors). How do I input the deductions (either just the total deduction/employee such as $150, or deduction/insurance/employee such as $100 for medical and $50 for dental). I know QB recommends using a Journal Entry for third party payroll, but unfortunately this is how the system was initially set up and will not be changed by the finance department.

If you could elaborate how this would effect the P&L and Balance side, I would greatly appreciate it. Thanks!

KhimG · ‎January 07, 2019

Hi there, @hm4.

Thanks for visiting the Community. Let me share some information about recording data from a third-party payroll service into QuickBooks Online (QBO).

Most QuickBooks users with an outside payroll service use Journal entry and checks to record transactions. You’ll have to get a report from ADP and enter the data manually in QBO.

Here’s how:
1. Go to the Plus (+) icon and select Journal Entry.
2. In the Journal date field, enter the transaction date.
3. Fill out the information needed.
4. Once done, hit Save.

For more details on which accounts to debit or credit, please refer to this link: https://quickbooks.intuit.com/community/Employees-and-payroll-taxes/Record-payroll-transactions-manu...

The scenario provided on the article does not include insurance or retirement. You may want to consult your payroll service provider or accountant to ensure your books are correct.

That should get you pointed in the right direction. Please let me know if you need anything else. Thanks for coming to the Community and take care!

View solution in original post

KhimG · ‎January 07, 2019

Hi there, @hm4.

Thanks for visiting the Community. Let me share some information about recording data from a third-party payroll service into QuickBooks Online (QBO).

Most QuickBooks users with an outside payroll service use Journal entry and checks to record transactions. You’ll have to get a report from ADP and enter the data manually in QBO.

Here’s how:
1. Go to the Plus (+) icon and select Journal Entry.
2. In the Journal date field, enter the transaction date.
3. Fill out the information needed.
4. Once done, hit Save.

For more details on which accounts to debit or credit, please refer to this link: https://quickbooks.intuit.com/community/Employees-and-payroll-taxes/Record-payroll-transactions-manu...

The scenario provided on the article does not include insurance or retirement. You may want to consult your payroll service provider or accountant to ensure your books are correct.

That should get you pointed in the right direction. Please let me know if you need anything else. Thanks for coming to the Community and take care!

qbteachmt · ‎January 08, 2019

You can do it with Split Details on the check, too. You don't Need to use JE.

Like this:

Gross Wages (expense)

minus every kind of Liability deduction that you pay out later

= Net takehome on this check

Here is a topic with Images, from QB Mac, that is the same thing:

https://qblittlesquare.com/2011/02/payroll-i-want-to-do-it-myself/

mb4ngirl · ‎April 12, 2019

Hi there

I have outsourced payroll as well - They debit our account 3 times - 1 for the 'net salary'; 2 for the service fee; 3 for the pr taxes (EE and ER). I am fine with using their service for all detailed reports.

My question is about the 3rd transaction - I record the transaction in the register and split into payroll tax expenditures for the employer portion, and payroll tax liability for the employee portion. Now I have a payroll tax liability account with a negative balance, showing on my B/S. I understand I need to clear the liability. What is the most simplest way to do this and if it is a journal entry, please can you specifically lay out the info like I am a 5 year old.

Accrual Basis

So here is an EXAMPLE for the part I am having a hard time entering and clearing:

on 2/1/19 Payroll Company deducts 1000 for payroll taxes from my checking acct (Employer 200 and Employee 800) for pay period ending 1/31/19.

Transaction split of 1000=
dr payroll tax expense 200
dr payroll tax liability 800

Now my payroll tax liability shows -800.

What do I do exactly to clear this liability? Please lay out the exact journal entry per the example I have given above?

Much Appreciated

Anonymous · ‎April 12, 2019

Hello mb4ngirl,

We appreciate the details you've provided.

Recording payroll transactions manually in QuickBooks can be done by entering journal entry. In this situation, we've prepared a great article for a reference. It has the complete steps and accounts to choose for payroll transactions. Please check it out: Record payroll transactions manually.

You may also get some more help from your accountant on which accounts to select for payroll liabilities.

Let us know if you need anything else. We're right here for you.

mb4ngirl · ‎April 12, 2019

Thank you but I have seen that article - I am looking for specific help on entering the employee payroll taxes (using the payroll tax liability account) When I split the payroll taxes into employer taxes (using the expense account) and employee taxes (using the liability account) I get a negative balance in the liability account. How do I relieve that negative balance. Thank you for the help.

Anonymous · ‎April 13, 2019

Hello mb4ngirl,

Thanks for the follow-up.

Let's update the Journal Entry and make sure that the employee tax amounts (expense accounts) are entered in the Debit columns. While the Employer tax amounts are in the Credit column. Then, Save and close. Once done, run the Balance Sheet report again. Please see the example screenshots below.

Please let us know if you need anything else. Thanks!

RLF1 · ‎April 14, 2020

What is the next step to this? Once the true bank withdrawal posts, should it be matched to these journal entries or just posted to the liability account?

FritzF · ‎April 14, 2020

Thanks for joining this conversation, @RLF1.

To answer your question, the next steps should be both. You can manually match them to avoid duplicate transactions once they will be downloaded from the bank since the journal entry will be posted to the liability account as well.

Just in case, I'll add these articles for future reference:

Please leave a comment below if you have any other questions or concerns. I'm more than happy to help. Have a wonderful day!

Topics

Training

Community

Resources

Third Party Payroll Deductions