Company I am working with has a PEO who pays invoices, employee tax, employee benefits, etc
Hello some good sole!!
I am trying to figure out how to adjust the employee payroll liability, employee health deduction.
I receive invoices that the PEO pays out in one big chunk the salaries, contractors, etc. They payout
the tax payroll liabilities and health insurance payments.
My Journal entries to zero out payroll liability for the month is not correct. Need help
with the JE for EOM.
Greatly appreciate the help!
It is difficult to help, without being able to see what is wrong, or see the PEO invoice and your AJE's. Just a guess, is that many medical insurances are billed prior to the month it is paying for. That said, often your Med Ins liability account is negative, until all payrolls have been posted for the month the payment is paying for. Other idea is how you are making entries if the company pays a portion of the med insurance...are you making them to the liab account or directly to Expense....then, when you post the payment, are you posting to the correct accounts as they should be.
If you could explain better what isn't working, it may be easier to help you.....
So rare to come across someone with the same first name. I realize your question was 6 months ago but in case you have not had received a solution, I also have a client that works with a PEO and manages their payroll & worker's comp. I run a payment allocation report which summarizes wages, employee taxes, employer taxes & deductions. The difference of wages and invoiced amount I post to worker's comp. It includes payroll expenses as well but I just run an average from prior vendor, subtract from the difference to obtain worker's comp. To be honest, obtaining reports from this PEO is difficult. I have requested tax reports but still waiting.
Appreciate your response.
I attached sample of invoice and my work to make it easier to discuss. I blacked out Company name for their privacy.
When I receive the invoice I enter invoice into appropriate expenses. The salary expense amount on the invoice includes EE Taxes and Benefit responsibility. Usually Company pays out of cash for this
amount but since it is a PEO it pays out of their account all at once. I broke down the salary expense that the company can take, but I am stumped with the EE Tax and Benefit responsibility since it is not a company expense. How do you recommend applying this amount to close EOM for payroll liability? I moved the EE expenses as part of the PEO expense but know that is not correct as well.
Appreciate your assistance! :))
I am attaching an excel template to enter your payroll. This particular template allows for 3 different classes, so feel free to remove or rename accounts that you don't need.
Be sure you are posting Liabilities to liability accounts, and the payments of those liabilities, back to the liability account, to zero them. Company portions are posted to both liability and expense accounts.
I don't have time right now to try to enter your data into a spreadsheet....so, i hope this helps.
Thanks for your help. Still scratching my head with this though.
Maybe i am not understand the problem? Are you using a journal entry to enter these transactions? Are you entering the liabilities and expenses?
Essentially, your AJE will have the net amount CR to Bank, Gross DR salaries, the CR all liabilities, and DR all expenses. This is to enter the payroll.
Then, enter the payments, DR liabilities and CR bank.
That is the simplified version, but that is the bottom line.
As i said above, often, health insurance is paid in one month, lets say June, for the July liability. So, at the end of June, the Liab will be negative, or DR balance. As July payrolls are entered, this number will come up to Zero, until the following month's payment is entered.
When you enter your Fed and State liabilities, be sure to enter the company portion of the taxes, as DR Exp and CR liab. That way, when you pay the liab, it zeros out the account.
Sorry for delay with my response I can only work on this company once a week due to my work
schedule. The PEO pays all payroll liabilities - employer and employee. seems they take out the funds
when they send invoice to company. The liability payments come out of PEO account. So I deduct
the Salary expense, EE taxes and EE Benefits responsibility payments in one transaction. How do I
zero out EOM the payroll liability and EE benefit responsibility that has already been paid by the
PEO? I have tried so many scenarios and cannot find the solution. I have used JE to adust my
prepaid and employer benefit amount. That seems ok.
I have reattached a copy of my dilemma if you have time to review. It would be much appreciated.
I am sorry....I still don't understand your issue. If you are making all parts of the entry, including the payments to the liability accounts, all should be fine. Without seeing your work file, I don' think i can help you any further, without spending a ton of time, trying to understand the info sent, and trying to re-create it on my own. I simply don't have time to do that right now.
Ask the Client's CPA to help you with?
are you trying to zero out all the liabilities or just the Med insurance? Did you read my line about med insurance is often paid BEFORE the month of coverage? That means, the med insurance liab will show a negative amount, until the following month's payroll has been entered.
I am looking at your P&L, and why are you trying to zero out an expense account? The expense portion should all be company paid items, so there should be a balance in that account? Use the liability account for for ALL Liab, both EE and ER. Make an entry to account for the ER Expense. then when the total liab is paid, the liab account should be zero, (except the med insurance). The expense account should only show the company portion of expenses.
Hi, I did adjust the expenses. I have been trying to figure out how to zero the payroll
liablility for EOM. That is why you saw the huge EE expense ($49,854.85) in my first P&L.
I was trying to figure it out. Although not successful!
The PEO company pays the liability expenses out of their own account. The invoice I receive
is what I use to enter expenses and the liabilities.
Supposed to make it easier for the business owner. So I am not sure how to journalize
the payroll liabilities. Payroll liabilities are paid my PEO.
My understanding is that EOM payroll liablities are zero'd out?
I attached my adjusted financials. I made them easier for you to view. Learning how to manage
that better. 🙂
Thank you so much for your help. This has been mind boggling for me!
A couple of questions. Well, the first one, was about your payroll liabilities, and i can see the answer to that question on your BS. 2nd question, is what accounting software are you using? If you separate out all your Liability accounts, as Sub accounts of the parent account, then you may see the issue, without all of this hassle. Separate out your 941 tax (both ER and EE in one Liab account), your 940, your State taxes, your Med insurance, and any other benefits you may have, such as Simple Plans, or ??? This will make things clearer for you.
I think part of the problem is you don't have your Liabilities broken out, so you can easily what is wrong, and what is right. What is the huge balance in "Payroll Clearance - 2018"?
The payroll liabilities don't always have to be Zero on EOM..... Is the Med Insurance part of the PR liab account??? if so you must understand this: MED INSURANCE IS OFTEN PAID AT THE END OF ONE MONTH, FOR THE NEXT MONTH, SO IT WILL BE NEGATIVE AT ME, UNTIL THE LIAB'S ARE PAID BACK BY THE EMPLOYEE IN THE FOLLOWING MONTH! This is the 3rd time i has mentioned it....it could be part of the issue, but you haven't answered that question yet?
Have you even taken any courses or classes on payroll?
BTW - the med insurance is paid by your company, not the PEO. The PEO may pay it upfront, but ultimately, the company pays it. It is part of the AJE you enter. One more question: have you asked the PEO to send you an AJE to enter the payroll, rather than using the invoice? Maybe that is the problem?
Does an asset account exist on the books for the account they are using to pay the payroll from? If not then it sounds like you need to create an asset account for where the money is coming from on the books to pay down the liability account.
First, set up a new asset account for the new bank account in your chart of accounts.
Next, create two journal entries. You can do this with a DB to the new bank account and a CR to the PEO capital account. Then, you can post the reduction to the payroll liability account with a DB to the EE Payroll Tax Liability and a CR to the new bank account.
I based my answer on the note you wrote on the attached BS. I hope this helps.