QuickBooks Online Payroll Problem: Syncing “Pay Date” with end of “Pay Period” to make reporting correct.
Discussion of the Problem:
At the end of each pay period, payroll is processed. In this case, payroll is done on a semi-monthly basis, meaning that each payroll period ends on the 15th of the month and the last day of the month. That does not necessarily mean that payroll will be processed exactly on the 15th of each month and the last day of each month. Due to differences in time schedules based on crossing multiple time zones, payroll is necessarily not processed until late in the evening or on the following day. However, the “Pay Date” needs to be posted as having been done on the 15th of the month or the last day of the month respectively. This is true because QuickBooks Online payroll reporting is based on the posted “Pay Date”, not the last day of the “Pay Period”. Until about one month ago, QuickBooks Online payroll used to allow the bookkeeper to set the “Pay Date” to the end of the “Pay Period” rather than defaulting to the actual day when payroll is processed. Payroll reports would then correctly report the payroll amounts in the correct “Pay Period”. This is especially important at the end of each calendar quarter when IRS and state unemployment reporting is required.
As of about one month ago, someone made a change in the payroll subroutines that inserts an error message in the processing steps that states “Tax penalties may apply……You’ve picked a pay date that may cause you to make a late tax payment and incur a penalty. Try choosing a date closer to today’s date”. The real problem is that you cannot finish processing payroll until the “Pay Date” is changed to match the current date which may actually be the day after the end of the “Pay Period”. When the bookkeeper inputs the current date rather than the end of the “Pay Period” date, the reporting is thrown into the wrong reporting period.
QuickBooks Online payroll “Help” suggested that one go ahead and process the payroll with the incorrect date and simply request the “Help” folks correct the dates via a phone call to the “Help Desk”. That is nothing more than a work around, not a solution to the problem. If a company has 50 or 100 employees, that work around suggestion is totally ridiculous.
There are several possible solutions to the problem. The ones that I have suggested are as follows and require changes in subroutine coding:
Of the four solutions presented, I have ranked them according to desirability as follows:
2 – Best
3 – Good
1 – This is best combined with either 2 or 3 and is not necessarily a solution on its own without 2 or 3 above.
4 – Least desirable solution depending on how many employees a company has.
Payroll expenses and tax liabilities are recognized on your payroll date - the date of the paychecks. The pay period period is not relevant.
Payroll reports do not use the pay period, again because is it not relevant.
Similarly, payroll tax reporting pays almost no attention the pay period. In almost all cases, only the pay date matters - the date on the paychecks / the date payroll should have been distributed to the employees. The only exception I know of is the census calculations on the 941 and many state unemployment tax forms. In this one case the pay period is used to determine how many employees were paid for a pay period that includes a particular date of the month or quarter - usually the 12th of each month in the quarter.
When you pay on the 15th and last-day-of-the month, and those days fall on the weekend or even a weekday that the business is closed, then the pay date is usually adjusted to the next or prior banking day when the business is open, based on what you've communicated to your employees ahead of time. This may push the pay date into another month, quarter, or even year. When this happens, there is nothing to fix with the payroll, though some companies create adjustments for payroll expenses for their accounting just as they do when a pay period falls across a reporting period. The adjustments typically shift the payroll expense back into the prior period as 'accrued and unpaid payroll expense' or something like that, but the adjustments have no bearing on the payroll.
Notably, many companies process payroll a week after the pay period in order to give them enough time to gather time-sheets and to send payroll DD orders in time so that they arrive in the employees' bank accounts on pay day. In this case, there is no payroll expense and no liabilities incurred (and no payroll reporting impact) until the pay date.
That is just not correct. For many years, QB Online Payroll and QB Desktop Payroll has allowed me to back date the payroll checks if I happen to do payroll one day after the end of the payroll period. There is certainly no harm in allowing that to happen and the recent change which disallows that to happen occurred just recently. Otherwise, why would I be questioning this. I certainly understand your reasons and the fact that tax liabilities, etc. are not incurred until the checks are written, but for reporting purposes, etc., I happen to operate on a strict payroll schedule where the end of the payroll period is the pay date. In that way, all of my reporting is correct with he end of each of the various quarters and particularly the end of the year. Things really get messed up at the end of the year when the end of the payroll period is one year and the reporting falls into the next year. That's just not right. As a minimum, Intuit needs to allow a short grace period of say 24 hours before their new flag comes up that denies me and other users the ability to date the checks for the end of the payroll period. Matters like this that get changed by Intuit without notification are so frustrating and the low level support people have no clue where to even look to see what caused the problem. It takes hours and hours on the phone to try and resolve such a problem.