payroll liability accounts

Also, make sure all pay rates are current, such as if you gave an employee a raise last pay period. Confirm that you entered the hours for each employee correctly. Don’t forget to differentiate regular and overtime hours, as well as vacation and sick time.

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This data includes every financial transaction, including payroll. These are items that should never hit you expense report and be recorded in the liability accounts that your bookkeeper set up when the books were started. If there is any requirement to repeat the steps again for different employees and that is the manner by which you realize how to reconcile payroll liabilities in QuickBooks. SelectCreate Paymentto enter all prior payroll tax and non-tax payroll liability payments you’ve already paid. Reclassify payroll liability balances into payroll expense accounts.


This step involves calculating the employee’s gross pay against the correct hourly pay rates for your business. The equilibrium in these liabilities should practically be zero. In a reasonable language, the cash is held from the representative check, and that cash is paid to the legitimate tax office. A piece of the representative check is a cost and should be reserved for the obligation.

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In simple terms, the payroll liabilities account in a ledger is a place where payments due for the near future, but are yet to be issued are kept. In case you file quarterly or monthly payroll taxes, you must post the amount to your particular liability account that accounts for the expenses systematically. In simple words, comprehending the payroll liability account in QuickBooks is crucial to rectifying ledger reports.

How to reconcile payroll: A step-by-step process

The non-liability portion of the tax check should be booked as an expense to the business. The expenses breakdown to 4 categories as well; FUTA , SUTA , Social Security Expense, and Medicare Expense. The garnishments ought not to fall into your cost reports as they are held from the representative’s check, which is paid to appropriate offices.

If it’s overpaid, check out Resolve a payroll tax overpayment to learn how to handle them. When payroll is processed on April 5, cash is reduced by $3,000 and wages payable is decreased by $3,000. The expense was posted in March when the restaurant employees worked the hours.

You can also narrow the scope of your comparisons with the filter function and view transactions by type, the payee, the date range or status. Reconciling your accounts in QuickBooks Online should happen at least once a month when you receive your statements. Therefore, it’s important to ensure you aren’t missing anything that could cause your accounts to get out of balance. Get up and running with free payroll setup, and enjoy free expert support. Try our payroll software in a free, no-obligation 30-day trial. Make sure any new deductions were taken out, like if you get a wage garnishment for an employee.

How to Reconcile Payroll Liabilities in QuickBooks Online?

The employee does not receive the entire amount they earn. Some of the money goes towards taxes and other withholdings. The accompanying advances just work for Enhanced, Basic, and Standard payroll administration clients. Lastly, you cannot reconcile payroll if you lose all your payroll information. Aside from common cybersecurity threats, additional looming threats can disrupt or destroy your payroll system.

  • We provide round the clock technical assistance with an assurance of resolving any issues within minimum turnaround time.
  • This consists of researching outstanding payroll debts, like payroll taxes or benefit premiums, that haven’t cleared your general ledger accounts in a reasonable time frame.
  • Such reports should define the purpose of the payment (the employee name, the withheld amounts, etc.).
  • You’ll also need to take a deep dive into the payroll deductions you received for the period.
  • In finance, the term “reconciliation” refers to ensuring that two records of the same event match each other and are accurate.

See our top seven online payroll service providers to find the one best suited for your business. Ensure that all this information is up-to-date in your payroll register. You must report each deduction separately rather than as a total amount.

To be able to keep accurate accounting records, reconciliation of payroll liabilities is important. It is also an effective tool to maintain good financial health. Using a payroll software, like Gusto, to pays your employees and tax agencies will give you a solid source to check your general ledger transactions against. Reports you may need to gather from your payroll software are a payroll register, payroll tax report, payroll deduction report, etc.

You have to list down the details of Payroll Tax Deductions and Payroll Garnishments. The gross wages that are owed to the independent contractors and the employees. In our example above, the positive $150 which consists of two transactions for Vicki King net to $0 when combined with the $150 paid out to the health plan administrator. Paul Dughi has held executive management positions in the media industry for the past 25 years. He earned his master of business administration degree while working full-time as president of a multistation television group.

The Payroll liability balance report shows a date ranged report. The employee’s gross pay and Form W-4 information is used to calculate $150 in federal tax withholding on March 1. Assume that a restaurant owes workers $3,000 in payroll for the last five days of March and that the next payroll date is April 5. Using the accrual method, $3,000 in wage expense is posted on March 31, along with a $3,000 increase in wages payable . Workers’ compensation premiumsare paid by the employer, and the cost is determined by the number of employees and the industry. Record the liability check correctly through Create Custom Liability Payments or Pay Scheduled Liabilities.

This will help remove those liabilities for 2019 and 2020. FSLA) establishes rules for the minimum wage, other pay rates, and overtime hours. FSLA also requires that payroll records be kept on file for a minimum of three years. Health insurance premiums, retirement plan contributions, and other benefit programs are funded through payroll withholding. 7.65% FICA tax rateon the worker’s gross wages, and the worker’s taxes were withheld from gross pay.

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Now you know how many hours you need to be compensating an employee for during that payroll period. It’s time to determine the other half of the equation by figuring out what pay rate you should be multiplying that number by. You may observe that the option varies according to your geographic location and the agencies with which you are registered for payment. Although having payroll software makes paying your employees the right way much easier, you still need to know the basics. When dealing with benefit premiums, you might need to pull the related invoice to see who you were charged for and how much.

Take your time and go deep when learning how to reconcile your payroll liabilities in QuickBooks. Payroll liabilities are mainly created when you have an obligation to pay an employee, that is, you have accumulated unpaid wages or have withheld amounts from payroll. To get an accurate monetary report for your enterprise which is liability-free, it is absolutely necessary for you to reconcile payroll liabilities. The services of Contact Payroll are highly recommended as we provide high-caliber personalized services. Get your hands on the payroll services to empower your business. Keeping your business’s accounts in balance helps you make smarter business decisions.

Tap truckers bookkeeping services Affected and mark the Do not affect account radio button. This is to make sure you don’t double your payment record. In the Date and Effective Date fields, select the last paycheck date of the affected month or quarter. If you need to run a payroll checkup for a previous year, you must change your computer’s system date to the last day of that year. Notice that it is the paycheck date that determines whether the paycheck is in the date range of the report.

  • That account will be zeroed out when the monies are paid to the proper agency.
  • For example, liabilities accrued in October, but paid through November, can show as due.
  • Your goal is to get that difference down to zero, which will show a match of all transactions.
  • You can’t complete a QuickBooks reconciliation if there are problems with the beginning account balance.

Additionally, you’ll need to reconcile your payroll quarterly using Form 941. To do this, review your payroll register for the quarter. Next, compare what you have in Form 941 and your payroll register.


Reconciling the payroll liabilities in QuickBooks often becomes an important need for business owners. To do so, you need to follow certain steps and guidelines. Using the proper section to record your payment is important if you use QuickBooks Online to pay payroll liabilities and payroll deductions from your employees’ paychecks.

reconciling payroll liabilities

As you become more proficient at payroll reconciliation, it is absolutely worth developing a checklist to follow every pay period. Lastly, you’ll also need to reconcile your payroll at the end of the year when filing employee’s W-2s. Pull out your payroll register and check the year’s payroll figures. It’s much harder to fix payroll errors after you’ve paid employees.

Their pay rate needs to be updated on your payroll register. Now we can get into the specific payroll reconciliation steps. Small Business Stories Celebrating the stories and successes of real small business owners. When the payroll liabilities display a negative amount, it is not a good thing.

Make Journal Entries to Adjust QuickBooks Payroll Liability Account

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