Tracking Payroll Manually

There is a very simple method for tracking wages and payroll taxes in QuickBooks for those who are calculating employee payroll manually.

Begin by creating two expense and one liability accounts:

  • Employee Gross Wages (expense) – each time you pay your employees, you will allocate all gross employee wages, including the employee share of payroll taxes (federal withholding & FICA) to this account.
  • Employer Taxes (expense) – each time you pay your employees, you will allocate the employer share of payroll taxes, including FICA, SUTA, & FUTA to this account.
  • Payroll Liabilities (liability) – only use this account when you are letting expenses accrue and have not paid them out from your bank account yet. For example, payroll taxes owed to the IRS, and retirement plans and health insurance premiums paid periodically.

Be sure to allocate any benefits costs that are being split by the employer and employee to the appropriate expense accounts.  For example, payments on health insurance premiums should be allocated to a basic “Health Insurance” expense account for the employer share and the Payroll Liability account for the employee share since the employee share was already deducted from employee wages when you issued the employee a paycheck.

If you don’t pay any benefits expenses, and pay your payroll taxes via EFTPS, then discounting SUTA & FUTA, your Payroll Liability account should always have a zero balance after each payroll run.  This is a good check to ensure that payroll has been run correctly.

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