How To Enter Outsourced Payroll Information in QuickBooks
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.