There are a few ways to enter payroll into QuickBooks from an outside payroll service. The best way, I think, is to download the information into QuickBooks from the payroll service. If you are not able to do this for some reason, you have 3 choices that I can think of:
Method 1 – You can enter the net amount of the paychecks and tax payments into your bank account as the transactions happen and post them directly to Payroll Expenses. That’s the simplest, but not the most accurate accounting-wise. The reason being, you are not necessarily posting the payroll tax expenses and liabilities in the correct period. You also will be challenged to separate out the employer payroll tax expense portion if you wish to (because the tax payments are made up of both employer tax expenses and employee withholding).
Method 2 – You can make a journal entry that will book the paychecks as well as the liabilities with the report from the payroll service when the payroll is processed. When you are using an outside service, none of the information appears in the payroll system in QuickBooks. You’ll need the payroll service to direct you or make your payroll tax payments for you. The payday journal entry would look something like this:
Debit Payroll Expenses 1500
Credit Bank account 632 (net paycheck 1)
Credit Bank account 426 (net paycheck 2)
Credit Payroll Liabilities 442
When tax payments are made, you post them as a check from the bank to the liability account.
Method 3 – Enter the paychecks into the register of the account, and in the split lines record something like this:
Paycheck 1 -
Payroll Expense 800 (includes the employee gross pay AND employer accrued tax liability for that paycheck)
Payroll Liability -168 (that’s a negative, resulting in a net check of 632)
The paycheck method entry is basically what you get when you are able to import from payroll services. I like the paycheck entry method, but it’s a little more work (if you don’t download) and I have found that it’s tricky to glean this information from the payroll reports that come from most payroll services.
I prefer Intuit’s online payroll system, which not only downloads into QuickBooks but with online access, makes it really easy to pay the liabilities and file forms electronically. Other benefits include sharing responsabilities with your payroll service (if you go through a 3rd party, like an accounting service), free direct deposit and employee access to their own paycheck and W-2 records. We offer Intuit’s online payroll, with several levels of service with complete support from us. You can find more information at http://www.nevadacountybiz.com/options-and-pricing/
The best way to do labor job-costing is to run the payroll through QuickBooks, using time sheet entry. Intuit has something called “assisted payroll”, where you run the payroll in the software and then and submit it electronically to them and they file your forms and pay your taxes.
If you are stuck with the payroll service, there is a work-around you can do – it’s not exact, but you can come close. Here it is:
Set up each employee as a vendor
- Enter their time sheet into QuickBooks under the vendor name, be sure to assign the job and labor item
- On a regular basis (weekly?) Create a “check” to the employee/vendor – when you enter their name on a check, it will ask you if you want to pay using the time entered – say yes
- The time will populate in detail in the split area (on the item tab) of the check – enter a rate for the employee that is approximate to the base hourly wage, plus payroll taxes (usually about 12%) plus work comp to populate the amounts for each line item
- At the bottom of the detail, enter the labor item on one line and enter a negative amount for the ENTIRE AMOUNT OF THE CHECK
- The net check amount will always be zero! You are basically creating job costs – then zeroing them out to no job. The actual paycheck created the expenses, so this check is just a wash.
This can be tricky and if you don’t zero out the check it’s going to be a mess. It’s also a lot more work than processing the payroll through QuickBooks, but it does work to get payroll costs assigned to jobs.