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n1njah
August 2, 2022
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Cash basis 12/31 payroll - how to record?

  • August 2, 2022
  • 1 reply
  • 0 views

Hello,

 

I'm confused on how to record for payroll based on two scenarios if i am a cash basis business.

I'm assuming I can accrue as cash-hybrid for payroll ...

 

Scenario 1:

12/15/21-12/30/21 pay period with check date 12/31/21

Would I accrue payroll tax expense with liabilities and debit wage expense and credit cash on 12/31?

 

Scenario 2:

12/16/21-12/31/21 pay period with check date 01/01/22

Would I only accrue payroll taxes with liabilities and on 01/01/22 debit wage expense and credit cash...?

Or do i also accrue wages on 12/31?

 

Or do I not accrue at all since im cash basis? Little confused here.

 

All help is appreciated. Thanks.

 

Best answer by BigRedConsulting

One a cash basis, your payroll is considered to have happened on the date you pay your employees. Similarly, the government considers the resulting liabilities to exist only on the date you pay your employees, not before.

 

This is true regardless of the work period you're paying your employees for, which could be after the work period by a day or a week, or even during the work period.

 

Be sure to include only the payroll you've paid in a reporting period - such as quarterly or annual - on  quarterly or annual forms for that period. Using your example, if you pay your employees on 1/1/2022 for work in 2021, that payroll is reported on tax forms in 2022.

 

 

 

1 reply

BigRedConsulting
BigRedConsultingAnswer
August 2, 2022

One a cash basis, your payroll is considered to have happened on the date you pay your employees. Similarly, the government considers the resulting liabilities to exist only on the date you pay your employees, not before.

 

This is true regardless of the work period you're paying your employees for, which could be after the work period by a day or a week, or even during the work period.

 

Be sure to include only the payroll you've paid in a reporting period - such as quarterly or annual - on  quarterly or annual forms for that period. Using your example, if you pay your employees on 1/1/2022 for work in 2021, that payroll is reported on tax forms in 2022.

 

 

 

    N
    n1njahAuthor
    August 4, 2022

    Thank you very much. I've been reading a lot of conflicting information. This cleared it up.

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