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Level 2

Salary question

I'm a part-time bookkeeper with basic knowledge of QuickBooks Pro desktop version. I need help on how to record a transaction.

 

A client didn't write himself a $12,000 Gross ($7,000 Net) Salary check this past December which I need to add into QuickBooks, per the accountant's request.

 

In January 2019 the client made his 941 form payment to the IRS for the 4th quarter 2018. (I haven't closed 2018 out yet).

 

In December the client wrote himself several checks totaling over $12,000, which he cashed, I applied those checks to Shareholder Distributions in QuickBooks.

 

I'm wondering if there's a way (Journal Entry???) to apply the Shareholder Distribution transactions to the Salary account and include the Tax Liability accounts or should it be done a different way?

 

The $12,000 Salary checks are recorded like this:

 

Salary $12,000
Payroll Liabilities:Social Security Tax Liability:   -$744
Payroll Liabilities:Medicare Tax Liability:            -$174
Payroll Liabilities:Federal Tax Liability              -$4,082

 

Thanks in advance for your advice on the best and easiest way to add the Salary transaction (including the tax liability amounts) to QuickBooks so everything is legit.

 

--- Richard

 

Solved
Best answer 02-11-2019

Best Answers
Highlighted
Level 15

Salary question

This is Payroll Math:

Gross Wages + Employer Taxes = expense for the pay date.

 

Your negatives are supposed to be Both Employer and Employee Taxes:

12,000 gross wages

negative 744 employee liability amount as SS

positive 744 employer Tax expense

negative 744 employer liability

negative 1,074 employee liability amount for Medicare

positive 1,074 employer Tax expense

negative 1,074 employer liability

any income tax withholding liability also is negative (is this the 4,082?)

 

That way, you Pay the 941 Liability total:

744 x 2

1,074 x 2

income tax liabilities (Fed and State)

 

You also need to show, on that Paycheck for that date:

FUTA positive employer expense 42

negative as FUTA employer liability 42

 

You likely have SUI, too. Positive is for the employer expense account and negative is to show it is held as liability to pay later. They Go Together.

 

You seem to want to treat the Paycheck as, "There was no banking event for the net takehome" and that means you still enter the Payroll. Do everything we covered, plus the Final net amount as Negative for the final line = Shareholder Distribution, if the same thing happened in 2018 = Distributions already is Negative. This is going to be treated as, "they left their Net pay in the business to Reduce their total distributions." Hit Recalculate and the Write Check ends at 0. There is no JE.

 

If the there is not Distribution in 2018 that runs negative to $7,000 then treat the Net takehome not as Returned to distribution, but as paid in Capital in Equity.

View solution in original post

2 Comments
Highlighted
Level 15

Salary question

This is Payroll Math:

Gross Wages + Employer Taxes = expense for the pay date.

 

Your negatives are supposed to be Both Employer and Employee Taxes:

12,000 gross wages

negative 744 employee liability amount as SS

positive 744 employer Tax expense

negative 744 employer liability

negative 1,074 employee liability amount for Medicare

positive 1,074 employer Tax expense

negative 1,074 employer liability

any income tax withholding liability also is negative (is this the 4,082?)

 

That way, you Pay the 941 Liability total:

744 x 2

1,074 x 2

income tax liabilities (Fed and State)

 

You also need to show, on that Paycheck for that date:

FUTA positive employer expense 42

negative as FUTA employer liability 42

 

You likely have SUI, too. Positive is for the employer expense account and negative is to show it is held as liability to pay later. They Go Together.

 

You seem to want to treat the Paycheck as, "There was no banking event for the net takehome" and that means you still enter the Payroll. Do everything we covered, plus the Final net amount as Negative for the final line = Shareholder Distribution, if the same thing happened in 2018 = Distributions already is Negative. This is going to be treated as, "they left their Net pay in the business to Reduce their total distributions." Hit Recalculate and the Write Check ends at 0. There is no JE.

 

If the there is not Distribution in 2018 that runs negative to $7,000 then treat the Net takehome not as Returned to distribution, but as paid in Capital in Equity.

View solution in original post

Highlighted
Level 2

Salary question

 
qbteachmt,
 
 thanks for the thorough response. I'm closing this question.

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