Payroll Taxes

[Andrew Sackville-West]

Maerk, please don't hijack threads. Start new ones. Many mail programs
recognize that your mail was a reply to a previous one, so it gets
grouped with those and may not get seen by those who should see it...

On Sat, Jan 05, 2008 at 09:07:42AM -0500, Matt Burkhardt wrote:
> I'm using gnucash for a small business and now I'm trying to figure out
> a better way to handle payroll withholding taxes.  Right now, I have
> Liability / Accounts Payable / Taxes / Federal / Employer and Employee
> accounts - that works out pretty well for me to pay the tax man each
> quarter.  I expense the Employer tax contributions so it's pretty simple
> to see what is paid out from the company's perspective.  However, I'm
> having problems on how to deal with the employee withholding taxes.
> 
> I can't expense them - since they're not an expense to the company.  The
> liability goes down to $0 after I pay off each quarter. How would I
> enter it so that I could just run a report out of gnucash to get the
> employee withholding amounts?

You should record, as an expense, the *gross* amount of payroll, and
then you reduce that gross amount by the amount withheld from each
employee. That is how you accrue balances in the tax liability
accounts for later payment. Then just run a balance sheet report to
see how much is owed (or just look at the accounts). Here is how I set
up a payroll check:
				DR		CR
Joe A. Employee
    Expense:Payroll:Labor	100.00
    Expense:Payroll:ER Tax	 10.00
    Liab:Payroll:FICA				14.00
    Liab:Payroll:MCare				 3.00
    Liab:Payroll:Fed				 8.00
    Liab:Payroll:Worker_Comp			 2.50
    Asset:Checking				 82.50

Here, I've paid the employee $10/hour for $10 hours and I've paid
Employer Taxes in the amount $10.00 (made up numbers here...), those
show up as expenses.
Then I've withheld $14.00 in FICA ($7 from me, $7 from employee),
$3.00 in Medicare ($1.50 from me, $1.50 from employee), $8.00 in
federal withholding (all from the employee), and $2.50 in Workers
comp, all from me. Add up my amoutns, and it matches my expense amount
($10.00). The remaining amount is the employee's net paycheck.

That way you are showing the true expense for payroll and employer
payroll taxes as well as the source for each liability. 

In actuality, I split the FICA, MCare and other "shared" withholding
onto separate split lines, though I accrue them into the same
liability account. You could just as easily split them into separate
liability accounts as well. 

HTH

A
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