Payments to Tax Agency


Greg Maxey

I don't know if I have done this correctly or not or really what to do next.

I did a sample manual payroll journal entry:

Credit Debit
Payroll Liability SUTA 11.49 Payroll Expense SUTA
Payroll Liability FUTA 1.34 Payroll Expense FUTA
Payroll Liabilty FWH/SS/Medicare 37.72 Payroll Expense Employer
SS\Medicare 12.86
Expense Wages 24.86
Payroll Liability State WH 7.00 Payroll Expense State WH

Then wrote a the emplyed a check:
Credits Debit
Checking 136.16 Payroll Expense

Is this the right way to do this (or close)?

If it is right. My next question is what do I do when it is time to pay the
taxes. When I write a check to the IRS for the FWH\SS\Medicare or to the
State Employment Commission for SUTA, etc. how do I record that transaction?
Should I use another journal entry? It seems that these Current Liability
Accounts values should appear somewhere as an amount due. Like have the IRS
as a vendor and when I went to pay bill these values would appear as a bill.
I quess that I am trying to determine how to make these Current Liability
Accounts balances = 0.00 when I have made the payments.

Sorry for such a scatter brained question.

Greg Maxey - Word MVP

My web site
Word MVP web site




Your payroll expense is allocated against a Creditors account
When you pay its from a checking/bank account against the Creditors
Liability account, thus reducing the liability


Greg, Because of line wrap, I had trouble following your entries. SUTA
and FUTA look right. SS meidcare should only be the employers portion.
If you have multiple employees you can do this in total for everyone.

When you write the check enter the gross to wage expense. Enter minus
lines for what is withheld to get to the net check. The witholdings go
to your PR liability accounts.

A bill will not automaticly be created. Your payroll liability
accounts show what is due. When you pay the liability, post it to the
liability accounts and your payment will zero out the balance.

And debits usually are shown on the left and credits on the right.


Greg Maxey


I may have spoken to soon.

Let me try my example use how I currently understand your guidance and
perhaps you can tell me where I am off course if at all.

I have one part-time employee that worked 24 hours @ $7.00 per hour.

I used another software application to figure the payroll:

Gross wages 168.00
FWH - 12.00
SS - 10.42
Medicare - 2.44
State WH - 7.00

Net wages - 136.14

Employer share SS/Medicare - 12.86
FUTA - 1.34
SUTA - 11.49

I did a journal entry as follows (Note: PRL stands for Payroll Liabilty and
PRE stands for Payroll Expense):

Debit Credit
PRL SUTA 11.49 PRE SUTA 11.49
PRL FWH/SS/Med 12.86 PRE FWH/SS/Med 12.86

I issued a check to the employee:

The first line I used PRE Wages and entered the gross pay 168.00
The second line I used PRL FWH/SS/Med. and entered -1 as the QTY and 24.86
as the Unit Price. This resulted in a negative value in line total column
The third line I used PRL State WH and entered -1 as the QTY and 7.00 as the
Unit Price. Again this resulted in a negative value in the line total

So are everything looked correct in the Chart of Accounts.

Next I created 3 Vendors (IRS, NC Dept. of Revenue, and NC Employment
Security Commission). I set PRL FWH/SS/Med. as the default expense account
for the vendor IRS, I set PRL State WH as the defualt expense account for
the vendor NC Dept of Revenue, and I set PRL SUTA as the defualt expense
account for the vendor NC Employment Security Commission.

As a final test I wrote a practice check to the NC Department of Revenue for
$7.00. This brought the balance of the PRL State WH account to zero as

It seems like it is working but I wasn't sure if it is working per your

It seems odd that I have to use a (negative QTY and a Unit Price) in the
check dialog. Is there a better way?

Thanks so much for your patience and all of your help.

Greg Maxey - Word MVP

My web site
Word MVP web site


Greg It appears correct except I assume in the journal entry you typed
here for the employERS share you reversed debit and credit. The PREs
should be debits and the PRLs should be credits.

I forgot that you had to use a negative quantity to get a negative
amount on the check distribution. Glad you figured it out. In
accounting terms gross wages is a debit to expense. The needed equal
amount of credits comes from the negative line items you entered and
the net check. The negative tax lines increase liabilities and the net
decreases the asset cash in bank.

You should at a minimum separate FWH from FICA/Med on the check and
have separate liability accounts. You could also separate FICA and
MED. This will help you when are doing PR tax returns and W2s.

The above will confound your default account for the IRS. You will be
paying the IRS for a number of things, so a default may not be wise
for them.

If the voucher from the check to the employee is his pay check stub,
investigate what detail you are required to provide the employee. I
don't know off hand. Check both IRS and NC.

It looks good enough for me to fill out a job application and expect
to be paid correctly.




Greg Maxey


Thanks so much.

You were correct. In my JO entry I did have the credits and debits correct
but reversed in the text of the post here.

I took you advice and split PRL FWH/SS/Medicare in to three separate
liability accounts.

Thanks again.

Greg Maxey - Word MVP

My web site
Word MVP web site

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