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Entering Outsourced Payroll & Taxes

I have a client with the worst record keeping and business practices. (Yes, I am working on changing that.) To date, I have on-boarded his companies (multiple), and almost created a system to keep things manageable for both of us. Here is the problem: 1) He outsources his payroll and I have to integrate that into my bookkeeping records manually. I was going to do journal entries; however, he doesn't keep a separate bank account for payroll and business expenses. As a result, I cannot credit the bank account after debiting all the appropriate liability/expense accounts without making the bank balance inaccurate in QBO. In addition, the business isn't fully supporting itself yet, so it isn't like the necessary money stays sitting in the bank account until it is needed. Instead it is spent for other bills and he will put money back in the account when the expense shows up, if needed. Therefore, I feel the liability account amounts are not even accurate when I work things up outside of QBO. 2) This is also a problem with Sales Tax. I have considered turning on the sales tax feature to figure the sales tax that way, but I feel that is a waste of my time and his money since someone else is already doing that. Not to mention, I am unsure if that will solve this issue. 

 

I have considered creating an account in COAs to send credits to in order to balance out Journal Entries and write things off and then delete it at year's end, at which point I will have him follow appropriate practices in 2019. If someone could give me alternative or appropriate fixes for this problem, I would really appreciate it! Thanks!!  

2 Comments
Established Community Backer ***

Re: Entering Outsourced Payroll & Taxes

I don't understand this comment: "As a result, I cannot credit the bank account after debiting all the appropriate liability/expense accounts without making the bank balance inaccurate in QBO."

 

Then the JE is wrong. For one thing, if the Payroll service impounds the tax funds, you would not have a separate amount and there is no liability accounting to be done. You put in that JE what happens in real life for the paydate. Example:

Gross Wages Debit Expense

Employer Tax Debit Expense

Banking credit(s) for as many Transactions as the service takes from banking, such as All Direct Deposit and All Tax Impound(s)

= 0

Or,

Gross Wages Debit Expense

Employer Tax Debit Expense

Credits are split to Banking and Liability, for amounts not taken at this point in time. Later, you enter banking to pay that Liability.

 

Or, you want details for each Paycheck on the Check Expense in the name of each employee?

 

"In addition, the business isn't fully supporting itself yet, so it isn't like the necessary money stays sitting in the bank account until it is needed."

 

That makes no difference to your tasks of data entry. You simply enter everything that happens.

 

"Instead it is spent for other bills and he will put money back in the account when the expense shows up, if needed."

 

Yes, that is how it happens for anyone.

 

"Therefore, I feel the liability account amounts are not even accurate when I work things up outside of QBO."

 

Then you made some wrong value entries.

 

"2) This is also a problem with Sales Tax. I have considered turning on the sales tax feature to figure the sales tax that way, but I feel that is a waste of my time and his money since someone else is already doing that. Not to mention, I am unsure if that will solve this issue."

 

You never use two different systems for computing; they will not work the exact same. So, your Sales entries are:

Various Payments as Debit Banking (might be one deposit for that date)

Gross Sales Credit Income

 Sales tax Credit Liability

= 0

And later, the Sales Tax payment is paying out that Liability.

 

"to send credits to in order to balance out Journal Entries"

 

They should self-balance, or you overlooked part of the data entry details.

 

"and write things off and then delete it at year's end, at which point I will have him follow appropriate practices in 2019. If someone could give me alternative or appropriate fixes for this problem, I would really appreciate it! Thanks!! '

 

What would there be to Write off? That typically means something got overlooked, and you simply want to hide it?

 

Examples:

 

https://quickbooks.intuit.com/community/Employees-and-payroll-taxes/Record-payroll-transactions-manu...

 

https://qblittlesquare.com/2011/02/payroll-i-want-to-do-it-myself/

 

 

Frequent Contributor *

Re: Entering Outsourced Payroll & Taxes

My apologies for not being more direct. Let's see if I can be clearer in order to get the most out of your help, qbteachmt. 

 

The journal entries will balance. 

 

The bank account was originally reconciled by counting the taxes, etc. as expenses because they didn't have the payroll liabilities or any of that info. Now that I am trying to add in the payroll liabilities in order to zero out those accounts and make them accurate, I am looking for a way to do that without undoing and re-reconciling all the past months in order to do journal entries that balance.

 

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