Processing Payroll in the USA

Although MoneyWorks does not include payroll calculation tables, payroll checks can be processed within MoneyWorks recording the expenses and liabilities.

The deductions for income tax withholdings, FICA and FUTA deductions, along with any other source deductions must be calculated outside of MoneyWorks.

The IRS tax tables (amount of tax to be withheld and deductions to be made) can be calculated online using the IRS Withholdings Calculator located here.

The general business charts included as customizable templates in MoneyWorks, list the basic Payroll Deduction, Current Liability accounts and Payroll expense accounts. Others can be added to reflect your required payroll liabilities and expenses.

Current liability accounts 2600, 2610 and 2620 being the employee deductions that will record the liability for each payroll check.

Current liability account 2630 the Employers FUTA/FICA Liability that can be used if you are recording the liability on each payroll before remitting to the government, (Usually large businesses).

Expense account 7010 to record the total Wages per employee on each payroll.

Expense account 7120 the employer’s contribution or share of FUTA/FICA , which you could use alternatively to Account 2630 above, recording the employer’s remittance for FUTA/FICA amounts directly to the expense, at the time of remitting to the government.

In other words you may not need to use 2630 if you only record the employers liability at the time of remitting. Typically used by larger businesses with large payrolls and this larger liabilities. Your choice.

Account 7140 Health Plan is an example of other payroll deductions that you may have, which have to be recorded at the time of payroll and remitted to your provincial government.

Note: we do not know the specific employer deductions required in your state, this article should only be used as an example of how to record those liabilities and expenses.

Recording Payroll Payments

In this example Tom Smith is an employee  who makes $35,000 a year and is paid every two weeks.

The first line of the Payment is Tom’s Gross biweekly pay before deductions, charged to the Wages expense account.

The following lines are the Liability accounts listed above that are entered as negative amounts. Resulting in Tom’s gross pay or take home of $1,056.26.

As Tom is a regular employee you can set Tom’s Payroll payment up as a recurring entry for every 15 days or some other frequency at which time a new unposted transaction will be created with these details on that date. Since new recurring entries are unposted you can simply change the check number, or any other details, i.e. an employee reaching the annual maximum deductions, and then post. Saves a lot of re-entry.

Tom’s Payroll Check if printed on a three part form will print out with the details listing the Gross pay less deductions as entered in the detail lines of the payment, thus giving Tom a record of the deductions taken on his behalf.

Remitting to the IRS

At some point in time you have to remit the funds that you have withheld on the employee’s behalf to the IRS.

In our example we remit once a month and we only have one employee old reliable Tom. So our payroll remittance recording the two checks Tom received in January would be entered like so…

The first line being account 2600 for the total Taxes withheld for the month (using the account enquiry for the totals per account for the month) or $615.30 in our case.

Then the FUTU withheld and the FICA deductions withheld from the employees, charged to their respective liability accounts.

Or in accounting terminology we originally debited the liability accounts with a negative amount when creating the Payroll payments, and now we are debiting the same liability accounts with a positive amount, which zeros out the balances, thus eliminating the liability.

The Employer’s portion or contribution, sometimes referred to as the Employer’s Burden is also recorded at this time where using a separate line for each if applicable in your state. These two entries are recorded directly to the Expense account 7120, the employer’s share of FUTA/FICA or two separate expense accounts if you set them up in your chart of accounts. Your choice.

Payroll Applications

For companies that require or desire a standalone Payroll package, MoneyWorks will import payroll files that were created in CheckMark Payroll, which is a full function USA Payroll application that runs on Mac & Windows, producing IRS statements etc. Transactions exported from CheckMark can be imported into MoneyWorks Gold or Express as individual payments for each employee.

For more information about MoneyWorks Support in Canada, in the USA, or in the UK contact www.moneyworkssupport.wordpress.com

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