Journal entries vs. Bank Transactions

drkent3drkent3 Member Posts: 9

I'm struggling to reconcile what the Journal entries indicate for payroll and the bank transactions that are imported. The journal entries have the total cost, the net pay, the employee's taxes and the employer share. However, the bank transactions that say IRS USATAXPYMT never add up to what is in the journal entries, and they end up leaving a balance in the Payroll Liabilities account as there is nothing to credit that account that I can identify.

Comments

  • drkent3drkent3 Member Posts: 9

    FWIW, I am using Direct Deposit and Wave is taking care of State taxes as well - so I suspect that State taxes are being included in the bank transactions, but I can see no way to break them out to credit the Payroll Liabilities account.

  • drkent3drkent3 Member Posts: 9

    Not seeing much traction on this yet. Let me provide some details.

    There is a Journal entry for one month for a total payroll amount of 2235.00. This journal entry has the following breakdown: net pay 1714.58, tax to 3rd parties $285.42, employer taxes $235.00. All three credited to Payroll Liabilities.

    When the bank transactions come in, there are two: One for employee pay of $1714.58, and a second for IRS USATAXPYMT for the amount of $410.13 two weeks later. The net pay is debited from Payroll Liabilities, but there is no Payroll Liabilities debit record to offset the tax payments, so my accounting shows both an expense for $410.13, and a liability for $235 & $285.42. So at this time I have a total Payroll Liabilities credit of over $6600 for the year.

    Can anyone provide some assistance or an explanation for this?

  • mafostmafost Member Posts: 6

    @drkent3 I'm struggling with the same thing.

  • mafostmafost Member Posts: 6

    @drkent3 Here's what I found:
    "When activated, the feature creates a journal transaction where wages and taxes owing are recorded as a credit (increase) to Payroll Liabilities. This is the accounting way of saying "I'm on the hook to pay my employees and the government this amount." When wages are withdrawn from your bank account, or taxes are paid, an expense transaction is going to be imported into Wave if you have the same bank account connected. All you have to do with these is categorize them to Payroll liabilities to debit (decrease) the account balance. This is the accounting way of saying "Okay, I've paid those wages and taxes I was on the hook for."

    From this post on Jan 2019.

  • drkent3drkent3 Member Posts: 9

    Yes, I totally understand the purpose - however, in my case the bank account transactions (payments to the 3rd party) don't match the amounts in the Payroll Liabilities from the Journal transaction. Therefore, I either end up with a credit balance (as if I haven't paid the taxes, so I still owe it) or a debit balance (I've paid too much). Either way, it causes problems in reporting as my Payroll Liabilities is out of balance.

  • drkent3drkent3 Member Posts: 9

    I finally figured out that on the Payroll Taxes page you can click on the 'paid' amount and drill down by month to see the breakdown of what was paid. This allowed me to match up the bank transactions and journal entries so I could properly debit Payroll Liabilities. I am now in balance!

  • EmmaPEmmaP Administrator Posts: 639 admin

    Hey @drkent3 & @mafost! Thanks for reaching out. I'm glad to see you were able to help each other and you found a resolution in 'Payroll Taxes' page to view the tax breakdowns! It is always a great feeling when everything is balanced :)

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