Outside Payroll Service Adjustments - Accounting Software Secrets
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Outside Payroll Service Adjustments

Outside Payroll Service Adjustments

Outside Payroll Service Adjustments

Q – We use ADP for our payroll and enter the entire payroll, employee by employee into QB every pay period.  How do we enter a credit towards previous taxes paid in the “pay employees” module?  To clarify: sometimes we”ve had taxes deducted for a locality only to find that we”ve done that in error.  The employee wants the incorrectly withheld taxes given back to him.  How do we do that in a module that only deducts taxes so that the net check in QB matches that on the ADP check? (Submitted by Ellen)


A – A couple thoughts come to mind immediately, first is a procedural question, then second is how to handle the issue when using QuickBooks payroll.

Why are you re-entering the entire payroll? 

Usually, I have found this is not the best alternative unless:

    1. There is some reason the outside service is the better alternative (for example the QuickBooks user is not the one to submit payroll) yet the data needs to be entered in detail for class tracking or job costing purposes. 
    2. There is a specific need that is outside the scope of the QuickBooks payroll services (such as health insurance without once a month rather than each paycheck for weekly payrolls, additional payroll related services such as unemployment insurance management, etc)

Otherwise, one of two options is generally more efficient and less problematic: 

  1. Most payroll services now have a QuickBooks import routine available.  Although time consuming to set up and test initially, it saves countless hours from re-keying.  Based on a limitation of the SDK, developers do not have access to the payroll related activities.  For this reason, depending on the service used, the payroll will either be imported as checks or as journal entries (i.e. not as paychecks or payroll liability checks).
  2. Consider Intuit’s Assisted Payroll (previously Deluxe).  This service permits entering the information into QuickBooks just as you have been doing.  Then the payroll data is set to the processing center for tax impound, direct deposit transfers, and compliance reporting.  The Assisted payroll service accepts responsibility for the payroll in the same way as the outside service does, without the need to re-enter and reconcile the payroll.

Now, on to the real question: 

  1. When entering the payroll using the Standard Payroll Service, create a new addition type item that is coded to the payroll tax liability account. 
  2. Use this item when creating the paycheck that includes the refund of the tax to the employee in the other payroll items section on the preview paycheck screen.
  3. The last step is to reclassify the addition against the previous tax deduction by creating a payroll liability adjustment.  This process will correct the payroll liability report and keep the general ledger and detail reports in balance.

More information on this topic

Outside Payroll Service