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n1njah
January 30, 2020
Question

Can I have a payroll liability as of 12/31 if I am on cash basis?

  • January 30, 2020
  • 1 reply
  • 0 views

Hello,

 

I am on cash-basis but payroll taxes have not been paid for the prior quarter. Can I have a payroll liability on my balance sheet? I'm forced to accrue the expenses for the prior year. Is payroll liability the exception to cash basis?

 

Thank you

1 reply

K
KhimG
January 30, 2020

It’s nice to see you again in the Community, @n1njah.


Your payroll liabilities will show on the balance sheet.  It doesn’t matter if you’re using accrual or cash since this is money owed. 

 

The amount showing on the liability accounts are based on the paycheck date. Use that to record the transaction.

 

If you proceed with reporting the unpaid taxes, create an adjustment and use the same accounts associated with the payroll items. I recommend consulting an accountant to ensure everything is accurate.


Here’s how:

  1. Go to the Employees menu.
  2. Select Payroll Taxes and Liabilities, then Adjust Payroll Liabilities.
  3. In the Date field, enter the date for which you are adjusting.
  4. Enter the date that you want this adjustment to affect your liability balance.
  5. Choose whether to associate this liability adjustment with the company or specific employee. 
  6. Pick the payroll item from the Item Name drop-down and add the Amount. 
  7. Click Accounts Affected and choose the appropriate option.
  8. Hit OK twice to record the adjustment. 

 

Take a look at this article for the details: Adjust payroll liabilities in QuickBooks Desktop.

 

I'm here to provide further assistance if you need it. Thanks for visiting the Community and take care!

N
n1njahAuthor
January 30, 2020

Hi Khimg, thank you for the response. I guess what I meant was, for tax purposes would this create any issue? As in would I still be able to accrue payroll taxes and report that as an expense for tax purposes even though I haven’t physically paid it yet?

 

R
Rasa-LilaM
January 30, 2020

Thanks for adding more information about your concern, n1njah.

 

The taxes for the liabilities will continue to add up whenever you run payroll. If you’ll pay the 12/31 transactions, make sure to record them in the correct period. This is to ensure your financial records are correct.

 

For an overview of how your entries are displayed in QuickBooks for each accounting method, see the Differentiate Cash and Accrual basis article.

 

Reach out to me if you have any other concerns or questions about the product. Please know I’m here to answer them for you. Enjoy the rest of the day.

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