Proformative, For Payroll Taxes, does your company make a distinction between Employee Taxes and Company Taxes? Currently, our payroll provider expenses our company and rolls-up Employee Taxes and Company Taxes into one expense. As a result, it's somewhat labor-intensive to continuously break the expense into multiple accounts (especially when we have multiple departments). However, I would find it useful to be able to highlight the money dedicated to our gross wages. Does anyone have a recommendation on how to set up Chart of Accounts for Payroll vs. Employee Payroll
Chart of Accounts: Payroll Taxes
Answers
Have you questioned your payroll provider on this subject? I've used a number of different providers over the years and find it quite odd that you are not provided that detail explicitly. The company's expenses are limited to the gross wages and the employer share of taxes (SS/Medicare match, FUTA, SUI). The employee taxes are withholdings of employee assets, not a company expense - you are merely a collector on behalf of the government. These are liabilities when withheld and should never hit your P&L. It sounds like you are trying to capture it correctly on your books (i.e. gross wages) so I'd push back on your payroll provider to better meet your very reasonable needs.
We have salary expense, which is the gross wage, and payroll taxes that are for the employer paid portion of the payroll taxes. Employee withheld taxes are liabilities that are later debited out when the are paid. The entry for us goes debit salary expense, credit cash for the amount withdrawn on payday for the employees pay and credit the related withholding accounts (insurance, tax liabilities, etc.). Employer payroll taxes go to expenses and a liability account until they are withdrawn
Now, our provider breaks out the expenses for us as far as employer and employee paid taxes. Your provider should be able to do so as well.
As has been suggested, I would request such a breakdown from your payroll provider. They should know enough about the process to understand why you need this information separated.
Then... you expense the employer-paid taxes, but not those paid by the employee, as those come from the employee's gross wages. Gross wages would then be split into your various liability accounts such as Employee Wages Payable and Taxes Payable until you make payment.
I would suggest that your payroll expense (for gross income) be broken down into two separate subaccounts - one for Officer (Owner) Salaries and second one for Wages (hourly wages). You can add more accounts here, such as Non-Exempt Salaries, Non-Officer (Exempt) Salaries, etc. These accounts should be subaccounts under your Salaries and Wages (or whatever you call your main payroll wages account).
You should have a separate expense account for Payroll Expenses, which should include (as subaccounts) Medicare - Employer, Social Security - Employer, FUTA, SUTA, and any other payroll taxes that are paid by the employer (i.e., in some states, the employer is responsible for paying SDI - State Disability Insurance). There may also be some local payroll taxes (city or county) paid by the employer.
All of these accounts should also be shown separately under your payroll liabilities. You should break down the Medicare and Social Security to show Employee and Employer portions of these payroll taxes, as well as any other payroll taxes that might be split between employee and employer. There is no need to show the payroll taxes with " - Employer" or " - Employee" after the name of the tax, except for those that are split between the employer and employee (unless you want to do it this way).
You should also have a separate expense item for Payroll Processing Fees, as this is a separate line item on your tax return (it is not included in payroll expense or wages on the tax return).
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Accounting