Recording Payroll Tax Accruals

The taxes you withhold from your employees must be turned over to the government, and, as an employer, you have a responsibility to pay additional payroll taxes such as the employer's share of Social Security, Medicare, and unemployment taxes. Although these amounts are owed to the government when you issue paychecks, the amounts might not be due immediately. When your company owes payroll taxes, you have to create payroll tax liability accounts to record the taxes that are due. If you use QuickBooks to calculate your payroll, the liabilities are recorded automatically. If you use an outside payroll service, you need to record your payroll and payroll tax accruals yourself, as shown in this example.

Select Make General Journal Entries from the Company menu. Note that you might see an information window telling you about the QuickBooks automatic journal entry numbering feature. Click OK to close this window.

Enter the date of the payroll, which might be different from the date that automatically appears.

Enter the payroll expense account.

Enter the gross payroll expense (total salaries and wages before withholdings) as a debit.

Enter an optional memo.

Enter the first tax liability accountfor example, enter Payroll Withholding:Federal.

Enter the amount of tax liability as a credit.

Did You Know?

QuickBooks can enter payroll automatically. Although a journal entry like the one shown in this task or a check to your payroll provider is necessary if you outsource your payroll services, all these entries are made automatically if you prepare your payroll within QuickBooks.

Repeat steps 6 and 7 until all your tax liabilities have been entered.

Enter the cash account from which the payroll is paid.

Verify the net payroll expense (the amount of payroll actually paid out to employees after withholdings) as a credit. This amount is automatically calculated by QuickBooks and should agree with your records.

Save the journal entry.