Outstanding Payroll Liabilities

metairiedave · ‎January 16, 2019

I have a new client who has been using the QuickBooks(Desktop) Employee Center to "pay employees". She did this so that she could enter the gross, have QB's calculate the payroll tax, and she would then hand write the net check to the employees.

When it was time to pay the payroll taxes she would record the tax payments as regular checks and not go to the employee center to pay the scheduled liabilities.

This has been going on since 2017. The checking account is up to date and reconciled through 12/2018.

The balance sheet now has a huge payroll liability balance that I would like to clean up. Does anyone know how to do this? I can't apply the check payments to the outstanding liabilities. I can't delete the liabilities.

Thanks!

Rasa-LilaM · ‎January 16, 2019

It’s great to see you in the QuickBooks Community, metairiedave.

I can help you clean up the outstanding liabilities so your balance sheet report is correct. I’ll guide you through the step by step process.

To correct the issue, you’ll have to enter the tax payments outside the Payroll Setup window. This is to ensure that your tax deposits and filings are accurate.

Here’s how:

Go to Help at the top menu bar, choose About QuickBooks.
Press Ctrl + Alt + Y or Ctrl + Shift + Y to open the Setup YTD Amounts window.
Select Next until you reach the Enter prior payments section.
In the Enter Prior Payments window, choose Create Payment to enter all prior payroll tax and non-tax payroll liability payments you have made during the current or previous years.
Enter the Payment Date and For Period Ending date and make sure to enter the correct period when the payments were paid.
In the Taxes and Liabilities field, choose the payroll tax item that you've already paid.
Select Affect liability accounts but not the bank account.
After you have completed your first payment, continue to the next by selecting Next Payment.
Continue this process until you have completed all payments, and then select Done to save your work.
Click Finish.

For visual reference, check out this article and go directly to the Enter historical tax payments outside the Payroll Setup window section: Historical tax payments.

That’ll do it! The balance sheet report should now show the correct liability amount, and your payroll record will be in tiptop shape.

Keep me posted if you need further assistance with the process. I'll get back to help you. Have a great day ahead.

View solution in original post

Rasa-LilaM · ‎January 16, 2019

It’s great to see you in the QuickBooks Community, metairiedave.

I can help you clean up the outstanding liabilities so your balance sheet report is correct. I’ll guide you through the step by step process.

To correct the issue, you’ll have to enter the tax payments outside the Payroll Setup window. This is to ensure that your tax deposits and filings are accurate.

Here’s how:

Go to Help at the top menu bar, choose About QuickBooks.
Press Ctrl + Alt + Y or Ctrl + Shift + Y to open the Setup YTD Amounts window.
Select Next until you reach the Enter prior payments section.
In the Enter Prior Payments window, choose Create Payment to enter all prior payroll tax and non-tax payroll liability payments you have made during the current or previous years.
Enter the Payment Date and For Period Ending date and make sure to enter the correct period when the payments were paid.
In the Taxes and Liabilities field, choose the payroll tax item that you've already paid.
Select Affect liability accounts but not the bank account.
After you have completed your first payment, continue to the next by selecting Next Payment.
Continue this process until you have completed all payments, and then select Done to save your work.
Click Finish.

For visual reference, check out this article and go directly to the Enter historical tax payments outside the Payroll Setup window section: Historical tax payments.

That’ll do it! The balance sheet report should now show the correct liability amount, and your payroll record will be in tiptop shape.

Keep me posted if you need further assistance with the process. I'll get back to help you. Have a great day ahead.

metairiedave · ‎January 16, 2019

Thank you very much!

qbteachmt · ‎January 16, 2019

@Rasa-LilaM

Please learn from this input.

@metairiedave

You did not describe if the Manual Payments were posted as expense, which also would Double the expense reported for Taxes. You stated there is Large Unpaid Liability. That means the entry method is as follows:

Make a bank type of account and name it Payroll Clearing.

Using the reporting for every check done as a Manual Check, the Wrong way, you will use Pay Liabilities the right way; or use Create Customer Liability payments for each "liability period" that they paid for the wrong way. Example: First Quarter 2017 FICA. Pay the Same Amount they paid for the same date. Now click on the Expenses tab of this Pay Liability Check and enter the same info as from their Wrong Check, using Negative.

Top left = Payroll Clearing Bank.

Hit the Recalc icon. This is a $0 Check.

here is what you just did:

Their Wrong entry as expense is matched to the negative you just made for that same Date. You cleared the Liability paying it properly.

And now you need to review the Financial reporting and what was reported for income tax reporting. Examples that double-report expense include Write Check for any taxes and Child Support and anything else that should be Pay Liabilities. Or, they paid from Liabilities, but orphaned the Payroll items, which means the Payroll forms and reporting would have been wrong, and they might have entered adjustments. You need to review what they did, how they did it, offset what they did, and see the impact of the errors you just corrected.

Entering "pay liability" as Adjustments and not affecting Bank isn't always the right offset. It matters each time, what the QB User did wrong and what they used, instead of the right tool.

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