Q:

As far as changing the payroll taxes from the payroll expense account, should I go into payroll item lists and edit each account and create one new account called "Payroll Taxes" for all the different taxes or create an account for each tax? Or create sub accounts for each tax under a payroll tax account?

A:

For the QB payroll set-up, it is completely customizable, starting from how the program comes, with all of the liabilities lumped together and all of the payroll related costs lumped together. 

At a minimum, we need to separate out the gross wages from the payroll taxes because one of the basic reviews IRS does is a match between the wages expense deducted on the corp tax return and the total from the W-2s for the year.

For reconciliation purposes, I like to have sub-accounts that tie into the tax forms.  On the expense side, I like to set up a sub-account called Payroll Taxes under the main Taxes expense account.  Then, under the Payroll Taxes account, there should be a sub-account for each payroll tax form:
941 (FICA + Medicare)  
940 (FUTA)
SUI (State Unemployment)

Then, those company expense items in the payroll item list should be edited to be mapped to their new sub-accounts.  Items reflecting withholdings from the employees' checks, such as Fed and State income taxes and their share of FICA + Medicare, should not be mapped to the expense accounts. Those need to be mapped to the appropriate liability accounts.

Similar to the sub-accounts for the payroll tax expenses, I like to have sub-accounts under the Payroll Liabilities accounts that correspond to the various tax forms:
941 (FICA + Medicare + FITW)
940 (FUTA)
SUI
SITW

The balances in these accounts can then be reconciled at the end of each month to agree with the payments that need to be sent in.

I hope this isn't too confusing.  Until a few years ago, I was actually able to make all of these changes in my QBX version of client files.  For some reason, the QB programmers removed that capability a few versions ago, and those changes can only be done on the master QBW file.

Assuming the program hasn't been changed too much, if you make those edits to the payroll items now, they will be effective for all payroll entries in your data file, including all prior years.  This will make doing the 2006 1120S even easier.

Kerry

Labels: QB

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/03/2007 12:21:00 PM Send this post: