Bookkeeping

How to fix payroll records?

Hi,

I have a huge issue with the way payrolls have been recorded in QB. I noticed the secretary who has been issuing payroll checks has only recorded the checks net amounts plus the total payroll taxes (employee plus employer) in one account as payroll tax expenses.

I have the following scenario which I don’t know how to fix!

Correct entry to be recorded:

Payroll tax expenses 358.02
Wages. 4,680
Employer tax payable. 358.02
Employee tax payable. 873.25
Cash (checks issued). 3806.75
and after payroll tax payments:
Employer tax payable. 358.02
Employee tax payable. 873.25
Cash. 1231.27

What is already recorded in QB:

Wages 3806.75
payroll taxes 1231.27
cash. 5038.02

Please help me how to fix this with one journal entry. I cannot delete the checks issued and reconciled! I have to go back 2 years and correct all these!

in progress 2 Answer

Answer

  1. 74 Answers

    Hi, there are a few things to consider. The way the payroll expenses have been recorded of course is not correct but it will also not change the bottom line. Currently by recording the payroll at “Net” and recording the total amount of taxes paid all of the expenses are being captured from an expense standpoint but of course that is not the correct way to record payroll.

    There are a few options to correct this. If you want to do this in one entry, for 2019 you can look at the year-end payroll register and make reclassing entries. Again the total payroll should already be represented on the P&L you are just moving the numbers to categorized correctly. You should have Salaries & Wages, Employer Taxes, Payroll processing fees as 3 separate G/L accounts. What you are going to do is true-up the year-end payroll. So in QB run the 2019 P&L and adjust accordingly. You will be debiting (increasing) the Salaries and Wages to record that at Gross, you will be crediting the payroll tax expense account (which you should rename employer taxes) to decrease the payroll taxes. You will do the same for 2020 I would do this through 10/31 and then record payroll going forward the correct way.

    For November you should record the payroll expense (amount debited from the bank account) to Payroll Clearing the liability account and when you run payroll record a JE as follows:

    DR: Salaries and Wages (Record gross wages)
    DR: Employer taxes (Only portion employer pays)
    CR: Payroll Laibilies (balance sheet liability account)
    CR: Payroll clearing (this should clear the balance in payroll clearing)

    Please let me know if you have any additional questions.

  2. 15 Answers

    Thanks a lot. It was very helpful.

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