How Are Your Payroll Transactions Being Entered into QuickBooks?
If your company has QuickBooks and uses a third-party vendor such as PayData, Paychex or ADP instead of Intuit for payroll it is important to know that your payroll transactions may not be captured the proper way in your QuickBooks file. This could lead to additional time (translated as money) by your tax preparer in order to adjust these entries at year-end.
How are these transactions being entered incorrectly? When the payroll company pulls funds from your company’s bank account, there are typically three separate entries posted as follows:
• Net wages
• Payroll taxes (both Employer and Employee portions)
• Payroll service fees
The problem is that your company should be recording the GROSS wages, not the net wages, as well as the EMPLOYER taxes only, not the combination of both Employer and Employee portions. In order for these entries to be posted correctly, you will need to post an adjusting journal entry for each of the payroll cycles with the following breakdown:
There needs to be separate lines for each of the draws from your bank account since the bank feed (if you are using this feature) will show these transactions separately. If you only enter the credit as one whole total to the bank account, this total will not match up to your bank feed.
Once you set up the first journal entry, you can save yourself extra time for future payroll entries by establishing a recurring journal entry that you can re-use with each pay cycle. Then you only need to update the figures in the journal entry each cycle without having to enter it each time in its entirety.
Think about how much money you can save yourself by taking care of these payroll journal entries before year-end. Our RAD staff can assist you with setting up these journal entries and recurring transactions for your company.
Don’t let your bookkeeping be a second thought - the tools you need are available and we are here to help if you need us!
Written by Martha Leonard, QuickBooks Online Certified ProAdvisor