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We run cash basis accounting and have 3rd party payroll service. Can I enter Net Wages (not gross) and other payroll expenses as they appear on our payroll reports.

We 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? 

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Best answer 10-19-2018

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Established Community Backer ***

You can Only list all Payouts as Generic payroll expense,...

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.


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Established Community Backer ***

You can Only list all Payouts as Generic payroll expense,...

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.


View solution in original post

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Yes, the Owner has no wages, of course. Thank you for you...

Yes, the Owner has no wages, of course. Thank you for your answer and taking the time to understand my specific question. Much appreciated!
Anonymous
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Yes it is OK to make your payroll entries on a cash disbu...

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.

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Great. Thank you for your answer and taking the time to u...

Great. Thank you for your answer and taking the time to understand my specific question. Much appreciated!

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