How to accrue payroll at year end

Apples521 · ‎May 08, 2025

How do I accrue my payrol wages and taxes at year end? Last pay date of the year was 12/27 and the next pay date was 1/3. As of 12/31 QBO is showing no accrued wages or taxes and we're being asked for that entry in a financial review. I can't seem to find a report in QBO that breaks down the payroll liabilities for those 4 days at year end 12/28 - 12/31. I can only see a report for a whole week of payroll, in this case on 1/3.

BigRedConsulting

You're close, I think.

Payroll Liabilities is usually used for money that is deducted from paychecks - that is a liability owed to agencies, usually for taxes. Accrued payroll expense isn't a tax liability. So, often a new liability account is created, named something like Accrued Wages Payable.

Also, in addition to wages, there are company expenses for company paid taxes like SS, Medicare, FUTA, and often one or more state taxes. These can add up to ~15% of gross pay, which is probably material enough to record.

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Apples521

Edit: The 1/3 payroll covered dates of 12/22 - 12/28. The 1/10 payroll covers dates of 12/29 - 1/4. Do I need to accrue all 10 days 12/22-12/31, or just the 1/3 payroll for dates 12/22 -12/28? If it's just that 1/3 payroll I need to accrue I think that will be quite a bit easier.

BigRedConsulting

This is done using Journal entries, usually one on the last day of the year and another on the first day of the next year to reverse the first one.

Apples521

Ok, I think I've got this figured out. I will record the 1/3 payroll (for pay period 12/22-12/28) and record 3 days of the 1/10 payroll (for the 3 Dec days of pay period 12/29-01/04). In my best judgement I'll divide the total 1/10 payroll by 5 workdays and then multiply it by the 2 workdays that fell within that pay period.

As of 12/31
Dr: Wage Expense

Cr: Payroll liabilities account

Then reverse that entry 1/3. Does that sound right?

BigRedConsulting

You're close, I think.

Payroll Liabilities is usually used for money that is deducted from paychecks - that is a liability owed to agencies, usually for taxes. Accrued payroll expense isn't a tax liability. So, often a new liability account is created, named something like Accrued Wages Payable.

Also, in addition to wages, there are company expenses for company paid taxes like SS, Medicare, FUTA, and often one or more state taxes. These can add up to ~15% of gross pay, which is probably material enough to record.

Apples521

Ah yes, those had been accruing automatically, it was just the net wages, or what was deposited into each employees account on 1/3 and 1/10 that were not accruing. Thanks for your help!

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How to accrue payroll at year end