How To Integrate Patriot Payroll With Accounting
If you are a brand new customer and have selected both the accounting and payroll software, you will be taking through the accounting setup wizard, where you will select your accounts and the way you want your payroll integration in your accounting software.
If you have already set up your Accounting software, and add the payroll later, you will be prompted to make choices for your integrated accounting and payroll system under Settings > Payroll Settings > Payroll Integration Options.
First, you will choose to either record a summary entry or detailed by employee when integrating your Accounting software for the first time.
- If you choose One total summary, you will see the total net payroll amount appear in your General Ledger report for that pay date.
- If you choose Separate check detail, you will see each employees name as an individual row in your General Ledger report.
Next, choose from your Chart of Accounts which accounts you would like to use when recording journal entries from payroll.
Gross Pay Gross pay is the total compensation you pay to your employees.
Net Pay Net pay is the actual check amount paid to the employee after taxes and deductions have been taken.
Employee Tax Employee taxes are your employees tax obligations that you withhold from their pay and remit on their behalf.
Employer Tax This includes all employer taxes such as Social Security, Medicare, unemployment, and any other employer-paid taxes you may have in your state.
Determining Pension Expense In Pension Accounting
There are four important components that must be considered when determining pension expense:
- Current Service Cost: The increase in the present value of the pension obligation that results from the employees current services
- Past Service Cost: These costs arise from plan initiations, plan amendments, and reductions in the number of employees under pension plans
- Interest Cost: The increase in the overall pension obligation due to the passage of time
- Expected Income from Plan Assets: Income expected from assets in the pension plan, including investment income from interest, dividends, and capital gains
Journal Entry To Record Paying Expense Being Held As Liability
Youre not always going to pay an expense at the time you book it. For instance, when you expense an employees gross earnings, you may not be ready to remit the associated payroll tax expenses, such as FICA .
In this case, you would credit a liability account, or payable, until youre ready to pay. In the entry above, we booked $2,000 to FICA Tax Payable.
When youre ready to pay the tax agency, whether that be every two weeks or once a month, youll need to debit the FICA Tax payable account to clear the account of the amount youre about to pay and credit Cash, since money will be moving out.
| Account Name |
|---|
| $2,000 |
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How To Find The Mistake:
To avoid mistakes in this area:
- Review the plan document to determine the correct matching contribution formula and compare it to what you used in operation.
- Review the definition of compensation used to calculate matching contributions.
- Incorrect compensation used to determine elective deferrals normally leads to mistakes in the match.
What Is A Payroll Journal Entry
A payroll journal entry is a record of how much you pay your employees and your overall payroll expenses. That way, you can look back and see details about employee compensation, such as when you paid it, how much it was, and where the money went.
Payroll journal entries should be added to your general ledger each time you process payroll. If you handle your own bookkeeping, itâs important to understand how to record a payroll entry to track this major expense.
Even if you have an accountant, itâs good to understand what goes into each entry so you know how to interpret your books.
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Journal Entry For Payroll Deduction
Payroll deduction is the amount that company deducts from the employees payroll before making the payment to them.
The payroll deduction includes withholding tax on salary, 401k accounts payable, federal withholding tax, and so on. These are the items that are usually included in the payroll deduction. It happens when the company has to deduct the payroll amount from employees and paid to a third party such as a tax authority, the federal government, pension plan administrator, and so on.
Due to these deductions, the employees will receive less money than the agreed amount between them and company.
The company will record payroll expenses based on the amount they paid which is the gross amount. However, part of the gross amount is detected by the third parties which have mentioned above.
The employees only receive the net amount left after the deduction. This is the final amount that they take home.
So we can see the gap between what the employer paid and the amount employee receive. The difference will be recorded based on the nature of each deduction.
The employer has the obligation to deduct the difference and make payments to third parties such as tax authority, the federal government, and the pension fund manager.
Post Payroll Journal Entries To The General Ledger
Once youve finished entering your journal entries, you should review them for accuracy before officially posting to the general ledger many systems wont let you reverse the entry.
Check the numbers against the data you gathered from your payroll system. Does the total gross wage expense entry tie to your total payroll expense for the period? Be sure to confirm that your debits equal your credits .
If you have the support, its a good idea to designate at least one or two other employees as secondary reviewerssomeone in accounting or who wont present a conflict of interest. This will ensure your journal entries have additional eyes on them before they post it can also be helpful if youre out on a day that payroll journal entries need to be posted.
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How To Avoid The Mistake:
- Be familiar with your plan document’s terms and implement procedures to ensure that your plan operates according to your plan document.
- Work with your plan administrators to ensure that they have sufficient employment and payroll information to calculate the employer matching contribution per the plan document’s terms.
- Identify payroll services performed in-house, or outside services used, and how payroll is communicated to other in-house staff or outside providers servicing the plan. Identify who’s in charge and his or her responsibilities.
- Know how deferrals, loans, QDROs or other deduction payments are remitted.
- Be familiar with the procedures for how payroll errors are corrected, how corrections are communicated to the plan administrator and how records of corrections are maintained.
How To Post A 401 Journal Expense Entry
A 401k is a retirement plan in which an employee contributes a portion of her wages. A company often contributes its own money toward an employees 401k plan to add to the employees contribution as a benefit to the employee. While the employees contribution is part of the companys wages expense, the additional amount the company contributes is a 401k expense for the company. As the employer, you can record a journal entry for 401k expense to reflect the amount your company will contribute for a payroll period.
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Safe Harbor To The Rescue
One recommendation you can make for clients who wish to keep their 401 plan compliant and simple is to suggest a Safe Harbor plan. A Safe Harbor 401 plan exempts its sponsors from annual discrimination testing. To qualify as a Safe Harbor plan, a sponsor must make contributions to participants accounts, and those contributions must vest immediately. There are a number of ways to meet this requirement:
- Basic match. The employer matches 100% of the 401 deferrals each participant makes, up to 3% of that employees pre-tax compensation. The employer also agrees to match 50% of the next 2% of compensation that is deferred.
- Enhanced match. The employer matches 100% of the 401 deferrals each participant makes, up to 4% to 6% of deferred compensation.
- Non-elective contribution. The employer contributes a certain amount to all employees eligible to participate in the plan, whether or not they make 401 deferrals. The Safe Harbor non-elective minimum is 3% of compensation.
Its important to remember that Safe Harbor contributions must immediately vest for all employees. You can learn more about in our comprehensive Safe Harbor 401 guide.
Introduction To Pension Accounting
In addition to salaries, many companies offer other benefits to their employees such as pension plans, health insurance, stock option benefits, fitness memberships, or life insurance plans. There are very specific requirements around pension accounting, which will be outlined in this article.
For regular benefits, the accounting is relatively simple the employer records an expense for the amount of the benefits employees earn in a year.
However, the accounting treatment becomes more complicated when employees earn the rights to the benefits NOW but receive those benefits later, in the FUTURE. A clear example of such a benefit is the pension.
To learn more, launch CFIs online accounting courses now!
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How Do I Show A General Journal Entry For Company Deductions From Employee Payroll
At times companies have deductions from employee paychecks. These deductions include things such as FICA, Federal Withholdings, Wage Garnishment and 401k’s. In order to keep a proper set of books, the company must account for these items properly. To do so, the company must make a journal entry in the general ledger each pay period. The journal entry will record the wages expense and any deductions from the employee paychecks.
1.
Debit “Wages Expense” for the full amount the company must pay for the pay period.
3.
Add the total number of debits and then add the total number of credits. The numbers should be equal. If they are not equal, then there is a mistake in one of the calculations.
4.
Debit all the payable accounts when paying the money out of the company. Credit cash by the amount paid.
References
Writer Bio
Carter McBride started writing in 2007 with CMBA’s IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard’s Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.
How Do I Record My 401k
Write 401k Expense in the accounts column of the journal entry and the amount you will contribute toward your employees 401k plans in the debit column on the first line of the entry. Debit means an increase for expense accounts. For example, write 401k Expense in the accounts column and $500 in the debit column.
Does QuickBooks Payroll Do 401k?
So when an employee changes their 401 contribution, QuickBooks will know. And when a business owner adds a new employee, we? ll know, too. With our integration, 401 contributions are automatically deducted each pay run, giving business owners the freedom to focus on their business.
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What Are Acceptable Forms Of Payment For Payroll
CheckDirect DepositConsiderationsCashDebit CardFinal PayFederal Law Governing Final PaymentsImportance of State LawUnclaimed Paycheck unclaimed property.Why Must Unclaimed Paychecks be Turned Over to the State?escheatWhat Are the Rules for Returning Employee Paychecks?How Do I notify the Ex-employee?How Do I Submit Un-cashed Paychecks?How Do I Find Out the Escheat Laws for My State?Establishing a Procedure for Dealing with Unclaimed PaychecksWorker’s Compensation InsuranceratesCalculation details for Workers’ CompensationExample5.625 Adjusted Premium AmountDefinition of terms
- Gross wages. The total wage amounts of all pay items on a payroll check .
- Excluded wages. Any pay item that has been set up in the Setup > Payroll Items screen to be excluded from workers’ compensation for a particular state or for all states.
- Overtime premium. The portion of premium pay for all overtime amounts. Most states exclude this, although a few do not .
- Subject wages. The base wage amount from which workers’ compensation is calculated.
- Premium amount. The full premium amount due, before multiplying by the experience rating.
- Experience rating. A rating system used employers that can either raise or lower the premium amount due based on the client’s policy history and risk.
- Adjusted premium amount. The Premium amount after it has been adjusted by the experience rating.
State workers’ compensation limits
Sample Payroll Journal Entries
In this example, weâre going to look at the entries for payroll transactions for an employee named Sam. Letâs say Sam is your only employee, and her pay date is coming up.
To keep it simple, letâs say you use a bi-weekly pay period, and there is no state income tax. Sam also doesnât have any voluntary contributions .
Letâs break down each item in this entry.
First, you record Samâs gross pay by adding it to the expense account with a debit of $1,923. This represents the cost of paying Sam on her next pay stub.
Since you havenât run payroll yet, the $1,923 of gross wages represents the money you owe. Weâll balance that by adding items to the credit column .
Sam wonât receive her gross wages since you must withhold a portion of her income for taxes. These withholdings are known as employee deductions. We add these payroll tax expenses to the credits column. We also add in her net pay as well.
The total amount of your credits is:
- $147.11 is owed to the IRS for the employee portion of the FICA taxâwhich funds Social Security and Medicare programs.
- $230.76 is owed to the IRS for income tax withholding.
- The remaining $1,545.13 is owed to Sam on her next payday.
When you total up the debits and credits, youâll see that each column has a total of $1,923.
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S For Recording A Payroll Journal Entry
Now that you know a ton about payroll journal entries, here are the steps to prepare your own:
Then, when you pay your team:
This may seem like a lot of little steps, and in a way, it is.
When youâre managing a business ledger, paying attention to detail and double-checking your work is important. After all, itâs the tool you use to track your money, and you want to keep it accurate.
That said, you donât have to create each entry manually. You can use accounting software like QuickBooks to automate some of the steps.
If you want to streamline your payroll processing, Hourly payroll software makes your life easier by automatically calculating and withholding taxes from your paychecks. They even send them to the government for you, so thatâs one less thing you have to worry about.
How A Pension Works
Pension plans are best summarized in a diagram. The following diagram shows three major players: the employer, the employee, and the pension trust.
A pension trust is a legal entity that holds the pension investments and disburses the funds later, when necessary.
Trusts are managed by trustees, who are independent of the company. We can examine several relationships below.
Relationship 1: Employees provide services to the employer and, in return, they receive wages.
Relationship 2: Employers make contributions to the pension trust.
Relationship 3: Funds are used from the pension trust to pay the employee in the future and, sometimes, employees can also make contributions to the trust.
To learn more, launch our online accounting courses now!
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Faqs For Accountants And Advisors
Do your clients have questions about offering a 401 plan? Weve got most of the answers accountants and advisors need right here!
This article is the third in a three-part series thats designed to help tax pros and investment advisors give their clients great advice about 401 plans. We’ll go deep into the nitty gritty of what makes 401 plans tick, but you can also brush up on the why and how of 401s in the first two articles:
How Do I Set Up A 401k Match In Quickbooks
How do I set up the 401k Company Match?
What is the purpose of the general journal?
A general journal is a document that records business transactions in sequential order. It is the first place to record data entries for unique transactions not specified in other accounting journals, such as checks or invoices issued.
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