By default, Payroll is categorized under the expense account within Quickbooks, but it is not like that you can’t edit. Quickbooks has given all of us the privilege that if we are maintaining multiple expense accounts (as we always do) then we can categorize payroll under the expense account of our choice.
As every payroll item can only be categorized under a single expense account, you are bound to face issues. The reason why this is so because you would need to further allocate them under various heads like COGS and labor regular expenses which might give you trouble later on.
To get over this problem, just create 2 items for every expense account. This would mean that one would go into the COGS category and the other would be categorized under Expenses (payroll section). Though, you can have an exception for payroll taxes as you can have only one State or Federal tax. It’s always great to create journal entries for your payroll items as this would help you better categorize items.
How to Categorize Payroll Taxes in Quickbooks:
If you are looking for ways to work efficiently and allocate payroll taxes in their correct categories then check out for the steps below:
- Start by creating a new Quickbooks expense account. To do this:
- Click on the List tab,
- Select the Chart of Accounts tab.
- Hit the New tab. This will give you a dialogue box to create a new expense account.
- Name the account as you like: XYZ Payroll taxes.
- Hit Save and your new account will be created.
- Create 2 Vendor accounts:
- Under the main head account, you just created, create 2 sub accounts. Choose the New tab and create a sub account.
- Name them as you want.
- Pass Journal entries:
- It is always recommended to create journal entries for any transaction you do within Quickbooks. This helps you understand your entries better. To do this:
- Click on the Bankings Tab.
- Choose to pass a Journal Entries.
- Debit the XYZ Payroll taxes and Credit the vendor account for the withheld taxes.
- QuickBooks unscheduled payroll.
- Quickbooks Update Payroll taxes.
- How to set up payroll liabilities in Quickbooks?
Automate posting entries:
If the entries you created would remain same every financial year then you can save the transaction as “Automatic Entries”. What this will do is automatically post these entries so that you don’t have to go through the whole step again and again.
Since you will be paying federal, local and state taxes all separately, thus it would be a good idea to create different vendor accounts for each authority.
In case you have any doubt then talk to our Quickbooks Proadvisor now at ✆ +1800-270-1894