How to Accurately Enter Third Party Payroll into QuickBooks

by Marie on March 2, 2016

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The best and most accurate way to enter third party payroll into QuickBooks is to enter them via Journal Entries. First, you want to setup the expense as well as the liability items of the payroll in the Chart of Accounts. Then you want to enter one journal entry for each pay period, using the payroll items you created in the Chart of Accounts on their correct debit and credit sides, making sure you enter the actual check dates of the paychecks. You will include the employees names in the Name field, and a memo with the pay period as well as net, gross or taxes on each transaction line.

Entering Third Party Payroll into QuickBooks:

Create the Payroll Expense Items in the Chart of Accounts as sub of Payroll Expenses to record company expenses

Payroll Expenses
     Gross Payroll
     Soc Sec Company
     Medicare Company
     FUTA
     NYSUI

Create the Liability Items in the Chart of Accounts as sub of Payroll Liabilities to record employees withholdings

Payroll Liabilities
     Federal Withholding
     Soc Sec Employee
     Medicare Employee
     State Employee NYS
     City Employee NYC
     NY Disability

The Result: (click image to enlarge)
Third Party Payroll Entry

In Bank Register: (click image to enlarge)
Third Party Payroll in Bank

Entering third party payroll this way will allow every aspect of the payroll to be accurately accounted for; each paycheck will be listed separately with the gross, employee paid taxes, employer paid taxes, and the net payroll. The paychecks as well as the tax payments made will be easily tracked in the bank account register, and the amounts in QuickBooks will be on par with the third party company figures. Entering third party payroll this way will also make it easily identifiable in the reconcile window when you go to reconcile your bank account, and will show a balance on the balance sheet for any withholding that was not paid over to the relevant tax authority.

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