 QuickBooks Online 2023. Pay payroll taxes. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have open the free QuickBooks Online sample company. If you want the two open at the same time, we suggest using incognito window or support accounting instruction by clicking the link below, giving you a free membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Another browser to open incognito window. If using Google Chrome, you can select the three dots in the browser and incognito window and then put into the search engine QuickBooks Online Test Drive to find the sample company. We're going to use the sample company to compare the accounting view, the one that Get Great Guitars is in, and the business view, the view the sample company is in. If you want to change between the two views, you can do so by selecting the cog up top, switch the view down below. We're going to be duplicating some tabs like we do every time to put reports in, right-clicking the tab up top to duplicate it, right-clicking the tab up top to duplicate it, and then go back to the tab to the middle. And then the reports on the left-hand side, we're going to open up the favorite balance sheet report. By the way, if in the business view you want to know where the reports are at, they're on the left, they're in the business overview, and then the reports section. So then we're going to go to the tab to the right, open up the reports again, open up the income statement or profit and loss, close the hand boogie, and change the range. From O-1-0-1-2-3 to O-2-28-2-3, let's hit the drop down and look at it in a month by month, side by side, run it to refresh it. We've got Jan, we've got Feb, we've got the total tab to the middle, close up the boogie, and change that range. O-1-0-1-2-3 to O-2-28-2-3, run it to refresh it. That's the setup process that we do every time. So we've run payroll now, we did so in a prior presentation, and we've run in essence two months of payroll at this point in time. Let's just give a quick recap of the journal entry that happens when we enter the payroll into the system. And before we do that, let's take a quick look at the flow chart of what happens in the payroll cycle. Remember that payroll is just like a vendor cycle, typically. If it wasn't for all the laws and taxes and withholdings, we would just be paying someone and it would be like a vendor activity and we'd have wages expense and check an account would go down. But because there's so much stuff we have to track, including withholdings and taxes, it's got its own world here, it's its own thing, it's its own specialization. And so therefore we could track the time, meaning if they're on an hourly basis, we need to know how much time is going to be entered to process the paychecks. But you could do that outside of the system and you might be paying someone salary and the time could also be used in a job cost system to create invoices. Then of course, we got to turn on the payroll, set up the payroll so we can process the payroll, which we will do periodically, typically, weekly, bi-weekly, semi-monthly or monthly. We are doing it monthly for the purpose of our practice problem. This is where we create multiple payroll checks, a payroll check per employee that will be like any other kind of check form but specially designated as a check form in the transaction detail report so we can distinguish it from other check forms or bill payment check forms, for example, and so on. We will also be making withholdings when we do this as well. That will increase a liability account and we'll also have our portion of the taxes which will increase the liability account and record an expense there. Now, we're in this component where we want to pay the liabilities that have been accumulated. So we took some money, in theory, this is what happened. In theory, we took some money from our employees and we're going to pay it on their behalf to the government. So remember, you can kind of think of it as though we gave it to the employees and then they gave it back to us, this being Social Security, Medicare, Federal Income Tax, so that we can pay to the government on their behalf. In actuality, the government forced us not to give it to them at all. We don't want to get their hands on it, the government says, don't let the employee touch it. And we're supposed to give it directly to the government. And then, of course, we had our payroll taxes that we have to pay over and above. That's what the liability has accumulated at this point. We need to pay that. And it's just that this whole process has nothing to do, in essence, with the payroll reporting forms because we're paying the taxes, not when we file the reporting forms, but just in the normal process. And then the informational forms that are reporting forms are the quarterly 941s, the 940 at the end of the year, the W-2s and the W-3s, which will summarize this whole process, basically taxable, payroll, the withholdings and whatnot, and compare that to what we actually paid and so on. So now we're going to go into the pay liabilities. Now, if you have the payroll set up within the accounting system, remember, you have two options. You can do it within QuickBooks, Payroll, or you can do it with a third-party provider. Either way, you typically have to pay more. If you do the payroll within QuickBooks, we want to make sure to use the widget to process the payroll. If you do payroll with a third-party provider, it's possible that you can actually kind of set your whole thing up still on a cash-based system and wait until everything, in essence, clears the bank and then just record everything as like a payroll liability and then adjust your payroll accounts on your financial statements to be correct periodically, possibly just at the end of the year, so that you can make your financial statements and do your taxes as of that point in time based on the payroll reports provided from the payroll provider, like an ADP or a Paychex. If you're trying to automate your whole system, separate the bookkeeping from any kind of accrual stuff, that's a method that you could use, but you need to have a network with a payroll provider, you doing a bookkeeper that automates the bookkeeping and a CPA firm or tax preparer, all of which have the knowledge to do their part in the process. If you're doing payroll within the system, then of course we need to track payroll as we go because the system is going to have to generate all these other reports to properly report the payroll. So as of now that when we enter the payroll, we know what's going to happen is cash is going to go down so whenever we enter the payroll for the first month and the second month, we saw the checking account has payroll checks that are impacted. Here that's for the net check and then the expense is on the income statement under payroll expense. That's for the full amount earned. So the difference between the two is the payroll liability, what we kept from the employee because we were forced to and that we're going to pay to the government on their behalf in theory, even though they're kind of forced to do it. It's not really a voluntary thing. That's involuntary taxes. So here it is on the liabilities. They increase. Now the liabilities also increased by our portion, the employer portion of payroll taxes. That being social security, Medicare and if we had it turned on federal unemployment tax are the main ones. And over here, we've got the taxes on this side. Now this is going to be reflected. You'll recall if I right click on the tab, duplicated in the sub ledger reports, which we will have if we're doing payroll internally, which we're doing here because it was part of our free 30 day trial thing. So we'll test in it out, playing with payroll, which is always good times, good times, payroll play. So we're going to go down here and say I'm going to go to the payroll summary by employee and change the range from 010128 to 020128. What? What? 2-3. Okay, so there we go. So there's the payroll for the two periods. Now we saw that this doesn't exactly match what we had in our system because we made some adjustments to our system general ledger accounts outside of processing the payroll. Now, just to point out that that's still going to be an issue. It's the same thing. You have a similar issue when you're paying the payroll. So now I'm going to pay off, for example, the liability accounts. So if I go into the payroll liability account, I'm going to be paying off part of this payroll liability account. But I'm imagining that we process the January payroll that we now have to be paying off in February. So the end January payroll, we've got a liability of 2028-46. And then the February payroll, we're going to actually pay it to the government in March. Now, obviously your payroll, when you have to pay the payroll and setting up how soon after processing the payroll, you need to pay it. You're going to have to make sure that you set up properly according to where you are and your requirements and your location when you do the setup. And it'll depend on how often you pay. Do you pay people weekly, semi-weekly, and so on? And how much payroll do you have in terms of how soon after processing you got to pay the payroll liability? But that's what we're going to do in our practice problem. So going back now, normally to do that, obviously all we would have to do is write a check. And it's going to be like a check form or an expense type of form, decreasing the checking account, the other side decreasing the liability account here. But normally we would want to do that with the payroll widget, going to the tab to the left and going down to the payroll on the left-hand side. We processed the payroll in here using the run payroll item. But remember some of our limitations in trying to do a practice problem with payroll inside of an accounting software is that payroll is generally designed to run real time. So QuickBooks is trying to kind of automate everything. And so it's hard to kind of work in the future or in the past like you need to do in a practice problem. So we don't have any like payroll check that is due as of this point in time when I process the check. If you work this payroll problem in the future, then you might have it due and you'll be in the future and you might have to be able to process the payroll. Also note that of course it's possible for you to kind of more automate the payroll process once it's going to be set up so that hopefully the pain of the payroll will happen when it's required to happen soon after you process the payroll. So you can kind of automate the system. But we can't get too much more detailed in our practice problem than that. So I'm going to just enter a normal check into the system to record us paying the government for the payroll. So once again you would want to do this in practice through the payroll system because when you process the 940s and the 941s what will happen is it'll recalculate your liability and then it'll show how much you paid them and hopefully you paid the exact amount of liability and the amount that you will owe at the point that you process the 941s quarterly will be zero. It's kind of like the form 1040 where in a perfect world you would already have paid your taxes exactly when you filed the form 1040 by April 15th and that should match your liability and you wouldn't get a refund or own any taxes at that point. It's impossible to do that because of the complexity of the tax code for the individual income taxes and the idea. It is possible to do that in payroll because they haven't completely made it totally out of whack that you can't do that anymore by having too much complication in the tax code as of yet. So they'll probably get there at some point. But in any case, so if you don't pay through the system it's not going to generate these reports that will populate automatically the amount that you have already paid and you're going to have a problem with reporting your 940s and your 941s in that way and so on. So, but this is what we got to do with the practice problem. So I'm going to make a check. We're just going to write a check form plus button. I'm going to make it a check form. We're going to decrease the checking account. Other side going to the liability. So I'm going to say this is going to go to, let's say now I'm going to make actually three separate payments and three separate vendors for the income tax. The Social Security and Medicare are all going to the federal government to allow it to tie into the bank reconciliation that we have already made. So I'm going to say IRS FIT Federal Income Tax. So that's going to be the vendor I'm going to set up and I'm just going to say that's going to be our vendor save it and then I'm going to say this is the check that went out. I'm going to say at the end of February 022823 for the amount that is due at the end of January or the payroll that we processed in January. Now I have to adjust the check number because we manually adjusted the check numbers in a prior presentation. So 1-0-2-4 I'm going to put that check number in which will be useful when we do the bank reconciliation. If their bank reconciliation doesn't tie in and you don't have a check number, not a big deal we'll still be able to work it. But I'm going to try to tie that into our bank checks and then we're going to say the payroll liabilities we want the payroll liabilities federal taxes blah blah blah 941-943 and so on. And so I'm going to take the amount of 1-0-8-0 Now I'm going to make two other checks which are in essence going to do the same thing checks decrease in the checking account the other side decreasing the liability account just making three checks to tie into the format that we have on our bank statement that we'll use to do our bank reconciliation. So I'm going to say save and new. Let's do it again. I'm going to make another vendor up top. It's going to be IRS and I'm going to say this time Medicare IRS Medicare Medicare's who's meta meta doesn't care it's a medicare like a meta thing. This is going to be 228 there we have it so I think the check number is now back on in alignment 228 that's what we want. This is also going to go to the federal in federal taxes but the 941 blah blah blah and this one is going to be for the amount of 2.52 and then we'll do it one more time UNO based mass hitting the drop down. I don't need the drop down save and new so this one is going to be I'm going to say one more time IRS social security company we'll just say okay boom and I'm making up the vendors they're all going to the to the government they're all federal taxes but in theory they're going to into different funds to be spent on different things although I'm highly skeptical that they just don't find a way to spend whatever they want on whatever they want to spend it on but that's a different issue where it doesn't matter this is the bookkeeping it's not getting to how the government waste our money. Now the whole other story. So here we go so we've got that one so now that looks good so now let's say save it and close it so I'm going to hit the drop down and save and close and check out what happened we're going to go to the tab to the right scrolling up let's run it to refresh it so we got fresh stuff and go into the checking account so within the checking I can scroll down and then we've got our checks that we have made here noting that they're not like special payroll checks or payroll tax checks or anything like that which is an indication that we processed them not using the payroll widget so if there was an issue where I processed the 941s and the deposits that I made are not showing up properly this would be an indication as to why because I didn't use the payroll widget I couldn't in the practice problem but in practice if things aren't matching up you can go in here and say okay I see what's happening because you're doing payroll stuff without using the payroll widget thing which means your sub ledger reports are off which means that they're not properly populating the 941s the 940s and the W2s and W3s and whatnot back to the report the other side is decreasing the liabilities here so if I go into the payroll liabilities boom and then go into this thing dingy dingy then now we've got our three checks and once again we can see them as checks so that would be an indication in here in an account that should have nothing but payroll type related transaction type forms when you have non payroll related transaction type forms if you're processing payroll within QuickBooks instead of by a third party provider that would be an indication of okay what's going on here you know something got out of whack and they're trying to fix things and things got more out of whack because they're fixing things outside of the widget but we have to do it in a practice problem because we're not working in real time and that's the issue so now we paid off the payroll for the first month so let's pull out the trustee calculator here just to kind of get an idea of this so we processed payroll we processed payroll through January and we ended up with a liability of 2026 and then we paid the payroll here with these three checks these three checks which are coming out to 108 plus the 82.52 plus the 865.94 and that's what comes out to this 2028.46 which matches that so we paid off the payroll for January in February we still have a liability which is from the payroll that we processed at the end of February which we're going to be paying in March that's the general idea after we do this no matter how we're structured whether we pay weekly whether we pay monthly or semi-monthly after the first quarter which is 3 months, January, February, March usually then by the end of the next month of the second quarter of April you got to file a form 941 that would be the quarterly forms which are going to summarize how much you owed and whether or not you paid that amount and hopefully it should be an information type of report so you're going to have to basically summarize this whole thing again on a quarterly basis that's the general idea and then show the IRS or the government how much your liability is how much you actually paid hopefully those things tie out so you don't owe anything at the point that you file the form 941 on a quarterly basis and then you would also generally have to do that on a yearly basis for the form 940 as well so that's the whole thing now remember that if you're doing this internally your 940s and 941s within QuickBooks will be generated from the payroll data so anytime I post something to these accounts any of these payroll accounts that isn't through the payroll widget here and on here on the income statement that's going to throw off my reports most likely and it's going to cause a difference between what's on our financial statements to what's on the W2s, W3s 941s and 940s and that's where people run into problems you would like to fix those problems during the year instead of having them surface all at one time when you try to file the year in W2s, W3s and do your taxes because at that point it has probably just kept going throughout the system for the entire year and you're going to have to kind of fix it at the end of the year which means your 941s might be off and you've got to deal with what you're going to do with that at that time and blah blah blah and it's the worst time to go back and fix everything when you're trying to do your taxes at the end of the year so not that I've ever experienced anything like that I'm just saying I've heard about it stuff like that happening so that's where we stand at this point in time if you want to let's check our trial balance and we're going to open up our hamburger on the left and go to the reports to check them out closing up the buggy and typing in trial balance we're looking for you trial balance TB we're going from 010123 to 022823 drop down month by month comparison run it this is where we're at if you're tying out then great if not try expanding the date range sometimes it's a date range issue and you might be able to change it if not then we'll run a transaction detail report after the data input of the second month and we can further drill down on our data from there