If you use a third party payroll service like ADP or Paychex, and you use QuickBooks Online as your accounting software (which we highly recommend) then you will need to know how to enter payroll with QuickBooks Online.
- There are normally three payments that come out of your account when you run payroll.
The mistake that gets made is that net pay is booked as the salaries expense, and the total tax payment is booked as the payroll tax expense. The fees are normally not an issue.
Here’s the problem with that!
And it’s not just a little wrong. It can be a LOT wrong. In the example I use in the video above on how to enter payroll with QuickBooks Online, you’ll see that one payroll is $3,000 wrong on payroll expense, and $5,000 wrong on the tax expense. Multiply that by say, 26 pay periods.
That’s VERY wrong!
So let’s get it right!
The net pay has to be recorded with the Gross pay as the salaries expense, and any withholdings and other deductions taken out to arrive at the net pay.
The payroll taxes have to be split between the withholding that was taken from the gross paychecks, and the employer’s share of the payroll tax expense.
The fees are easy. Just book the payment to Payroll fees. In your banking, you can usually tell from the description which payment is the net pay, which is the taxes, and which one is the fees. Also the fee payment is usually much less than the others.
The best way to learn how to enter payroll with QuickBooks Online is to pull the numbers you need from the report. The Payroll Journal usually has everything you need.
Lay it all out:
Then go enter payroll with QuickBooks Online.
The Detail Method
The detail method for how to enter payroll with QuickBooks Online means that you’re entering each paycheck individually. The issue is, this is not how they clear your bank account.
Create a bank account called, “Payroll Clearing” and enter each paycheck in there. The individual paychecks get entered the exact same way as how you enter the net pay for the totals.
Applying the same process, you enter each check with the gross pay, less withholding, less other deductions, and arriving at the net check amount.
Your payroll clearing account should wind up being negative for the amount of the total net pay. In the case of our example that was $19,510.73.
Now when the $19,510.73 clears your regular bank account, you simply record that as a payment from your checking to the Payroll Clearing account.
The payroll clearing account zero’s out. If it doesn’t then you’ve entered something incorrectly. Check each paycheck net amount. One or more of them has to be different from what they payroll report shows.
Comment below or get a session with me so we can fix your payroll.
Access the template used in the video –> Payroll Template (Click File, then Make a Copy or Download As).