How To Enter Outsourced Payroll Information in QuickBooks
Published 02/26/2009 | 
If you handle your own payroll taxes, the amount you pay your payroll provider is lower than your salary expense because of employee deductions.
If your payroll service handles your payroll taxes, the amount you pay is higher because employer-paid payroll taxes are tacked on.
The key to entering your payroll correctly is to understand the difference between gross and net payroll. Gross payroll is the total amount you pay your employees before deductions. This is your payroll expense. Net payroll is what your employees are paid after deductions. This is a mixture of payroll expense and payroll liabilities that need to be paid sometime in the future–things like state and federal payroll taxes, medical insurance, 401(k) contributions, etc. These things are not payroll expenses because your employee is paying them rather than you.
Sound too complicated? Then I highly recommend using Intuit’s Assisted or Enhanced Payroll instead. It will make these calculations for you automatically, and if you are doing any sort of job costing you’ll go crazy using an outside service.
This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.
Written by +Ruth Perryman, CMA, CFE, CFM, MBA
Ruth is the president of The QB Specialists, an Intuit Premier Reseller that offers huge savings and expert advice on QuickBooks POS and QuickBooks Enterprise. She is an Advanced Certified QuickBooks ProAdvisor and a member of Intuit’s Trainer/Writer Network. She is also certified in QuickBooks POS and QuickBooks Enterprise and has provided expert QuickBooks help to thousands of businesses all over the world since 1996.
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So gross payroll is your payroll expense and net payroll is your payroll liability or is it the difference of the two that is the liability?
The difference between gross payroll and net payroll is what was deducted from your employee paychecks. In most cases, they are payroll liabilities (payroll taxes and withholding, medical insurance and 401k deductions, etc.) But there are times it’s not. like employee advance repayments. Also keep in mind that the amount deducted from employee paychecks for social security and medicare is only a part of your payroll liability, it doesn’t include the employer’s share since it’s not deducted from paychecks.
It’s complicated which is the main reason we recommend getting a QuickBooks payroll subscription instead of using an outside payroll provider. We can get discounts for you, so give us a call at 800-707-0940 if you’re interested in switching.