Connect with and learn from others in the QuickBooks Community.
Join nowWe run cash basis accounting and have 3rd party payroll service. When I enter payroll, I enter the transactions similar to how they appear on our payroll reports: Net Wages (not gross), Employee tax liability, Employer tax liability, & 401k. I don’t do a JE for payroll tax liability. And the Employee tax liability is still part of gross wages b/c I’m entering Net Wages (basically I’m entering them after broken down, not Gross/before broken down). To get gross wages for the owner’s Sch. C and when I reconcile with Form 941s, I add Net Wages, Employee Tax Liability and 401k to get Gross Wages paid. Is this ok to do for cash basis bookkeeping?
Solved! Go to Solution.
You can Only list all Payouts as Generic payroll expense, if they are all the Same Date.
This is the Payroll Math:
Gross Wages + Employer share of taxes = Payroll expense
Now that breaks down for the One Date, as:
Takehome + tax payments = Payroll expense
Otherwise, you do have to manage Liabilities, for any delay in payments being made, and that means managing Gross.
There is no such as thing as Net Wages. There is Gross Wages and there is Net Takehome.
"To get gross wages for the owner’s Sch. C and when I reconcile with Form 941s, I add Net Wages, Employee Tax Liability and 401k to get Gross Wages paid. Is this ok to do for cash basis bookkeeping?"
Sure. But the Owner has no wages, of course.
You can Only list all Payouts as Generic payroll expense, if they are all the Same Date.
This is the Payroll Math:
Gross Wages + Employer share of taxes = Payroll expense
Now that breaks down for the One Date, as:
Takehome + tax payments = Payroll expense
Otherwise, you do have to manage Liabilities, for any delay in payments being made, and that means managing Gross.
There is no such as thing as Net Wages. There is Gross Wages and there is Net Takehome.
"To get gross wages for the owner’s Sch. C and when I reconcile with Form 941s, I add Net Wages, Employee Tax Liability and 401k to get Gross Wages paid. Is this ok to do for cash basis bookkeeping?"
Sure. But the Owner has no wages, of course.
Yes it is OK to make your payroll entries on a cash disbursement basis from the payroll summary report, but the entry itself is NOT as you you outlined.
Somewhere in that payroll report you will find the gross wages (not net), plus deductions, benefits and employer expenses. Your cash entry should include all of those items - the sum of which is the net payroll checks.
Thank you very much for your answer. If I understand correctly, you're saying that when using 3rd-party payroll service under cash accounting, the chart of accounts only needs a single entry -- "Payroll Expense" -- to handle all payroll transactions. And that for each payroll date, the journal entry will look like:
Debit 'Payroll Expense' account for takehome pay.
Debit 'Payroll Expense' account for all tax payments (both employee + employer).
Credit 'Cash'.
Can you confirm?
[edit: I wrote my reply to qbteachmt but somehow it showed up here as a reply to Anonymous.]