It’s not uncommon for QuickBooks users to use a single payroll liability account but it can be difficult to reconcile this account with payroll reports when the general ledger and the payroll reports don’t agree. Here’s a way to quickly identify and resolve issues.
Rather than use a single payroll liability account, I create sub-accounts of Payroll liabilities to isolate specific groups of liabilities so that sub-account totals can be compared to payroll liability totals. This can shorten the reconciliation process dramatically.
In the figure below, I have created sub-accounts for FIT W/H, Social Security, Medicare, Federal Unemployment Tax, State Income Tax W/H, State Disability, State Unemployment Tax, and Other State Taxes. You might have other liabilities for insurance, 401ks, etc. that you will want to break out.
The point is to match account totals in the general ledger with payroll report totals. This eliminates the task of manually breaking down a single payroll liabilities account to get payroll item totals you can compare with the payroll reports. The figure below shows a balance sheet report for my payroll liability sub-accounts and Tax Liabilities worksheet totals created from the payroll reports menu.
Notice that the general ledger balances for state unemployment and other state taxes do not agree with the payroll tax liability report. I was quickly able to reconcile the difference as resulting from prior year balances. By breaking payroll liabilities into more detail, we can spot problems at a glance and easily drill down from reports to identify the problem, saving time and making it easier to control your payroll liabilities.
Robert Guild is certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company at www.QBCoach.biz, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at rguild@QBCoach.biz or follow him on twitter at QBPro