Entering Journal Entry for Payroll using Paychex (2024)

‎May 23, 202008:58 PM

Hi,

I've been using Paychex as my payroll service for quite some time. I've recently started to question if I'm entering my payroll information from Paychex correctly into a journal entry within QuickBooks Online.

I read the QuickBooks Support help topic "Manually enter payroll paycheck in Quickbooks Online". In this topic, liability accounts are used when creating a journal entry for federal, state, and UI taxes.

I use the Taxpay service that Paychex offers. They will withdraw payroll and payroll taxes from my checking account at the end of each pay period and will remit all payroll and payroll tax requirements on my behalf.

My question is since Paychex is withdrawing payroll and payroll taxes from my checking account each pay period, would I still use payroll tax liability accounts when creating a journal entry in QuickBooks Online? Or would all payroll taxes be considered payroll expenses when creating a journal entry, since Paychex has already withdrawn money from my account?

Thank you!

• QuickBooks Online

Depends on a few things. Do employees do timesheets? Are you doing cash or accrual-basis accounting?

Timesheet entries:

Debit Labor Expense (Direct labor, OH, labor, G&A labor, etc)

Credit Accrued Payroll Payable (2x liability account)

Payroll entries:

Debit Accrued Payroll Payable (2x liability account)

Debit Employer Payroll Tax Expense

Credit Cash (Bank in QB)

Hi,

Employees do not fill out timesheets. I simply report salaries to Paychex. I mostly use cash accounting. Unfortunately, I don't think I follow your Payroll entries example. Would you be able to explain it in a little more detail?

Thank you!

Yes, I just explained one scenario, which is what I do using timesheets and accrual-basis accounting since this is required in my industry (GovCon) and what I have done for decades as employee and as biz owner now. Not a fan of cash basis, did for my own biz at first but prefer to do accrual same as I do for clients.

From what I see QB users do is a mix of cash and accrual-basis accounting, which I find very messy and not consistent for reports to make any sense at all. Why accrue AP and AR but not labor/payroll and revenue? How can you tell which months are profitable that way or which jobs are profitable to plan future business?

Seems to me if you are already doing a mixed bag of cash and accrual-basis accounting, does not really matter if you accrue payroll taxes or not, since either way none of the cost reports are very meaningful. However, whatever you do, suggest should be consistent month to month.