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J
jpcdis
September 15, 2023
Question

Missing payroll tax liability in QBO Online

  • September 15, 2023
  • 1 reply
  • 0 views

Hello! I'm concerned about my QBO Payroll configuration.

 

Question: Does QBO Payroll automatically create a payroll tax liability when it runs payroll?

 

Context:

  • My first payroll run was July 1, 2023. I have a corresponding liability in my balance sheet for the federal payroll tax owed.
  • When QBO paid the IRS in August 2023, I reconciled the transaction against the liability created in July 2023. 
  • My second payroll run was August 1, 2023. I have no corresponding liability in my balance sheet (unlike in July 2023).
  • When QPO paid the IRS today, I have no liability to reconcile it against.

 

Note1: I have no memory of creating the July 2023 payroll liability manually. But it's possible I did and just don't remember.

 

Note2: I have been unable to get any official QBO support member to even understand my question. They keep referring me to the Payroll Liability report (where the liability is recorded). I think the balance sheet topic is not included in their training.

 

Thank you!

 

    1 reply

    J
    jpcdisAuthor
    September 15, 2023

    Okay, update on this.

     

    I looked closer, and the liability for August 2023 *was* created but it's already by reconciled by the payment made today. Yet I still have an unreconciled transaction to for the tax payment to deal with, and obviously when I reconcile it to the appropriate liability, I create a negative likability.

     

    So I'm totally lost re: what to do now (but at least it feels like a simpler problem to solve).

    M
    Mich_S
    September 15, 2023

    Yes, QuickBooks Online Payroll automatically creates and calculates payroll tax liabilities when you run payroll, jpcdis. 

     

    As long as you input the correct information, then the correct amounts are set aside for taxes. This feature also helps you save time and ensures accuracy in managing your payroll taxes. Visit this link to learn more about how it's handled: Understand how your payroll taxes are calculated.

     

    Furthermore, when you encounter an unreconciled transaction in QBO Payroll, it's important to know that all your liabilities are properly accounted for. To fix the negative amount created when reconciling a payment, you can follow the steps below:

     

    1. Open your QBO company, and navigate to the Taxes menu.
    2. Select the Payroll Taxes tab, then Payment History.
    3. Locate the tax payment transaction that resulted in the negative liability.
    4. Hit Edit Payment.
    5. Click on Save and close.

     

    After that, QuickBooks should now update the liability balance accordingly.

     

    Please keep in mind that it's always a good idea to double-check your entries and consult with your accountant. They'll guide you in keeping your books in order. 

     

    For future reference, read these extra modules about tax filings and liability payments:

     

     

    Feel free to drop a comment below if you have follow-up questions about liabilities. I'll be here to help. Keep safe.

    J
    jpcdisAuthor
    September 15, 2023

    Hi Mich_S, thanks for the help. I think I figured it out.

     

    When QBO pays the IRS, it associates the transaction with account = Cash and reconciles the transaction to Payroll Liabilities: Federal Taxes (941/943/944). This reduces the liability by the correct amount, but also reduced Cash by the same amount.

     

    When the actual banking transaction (the outflow to the IRS) shows up and is ready to be reconciled, it needs to be reconciled in a way that reduces the negative Cash value without treating the outflow as an expense. I did this by reconciling the banking transaction as a transfer to Cash. If, on the other hand, I reconcile it to Payroll Liabilities: Federal Taxes (941/943/944), then I (in effect) duplicate the transaction, creating a negative liability.

     

    Does that make sense?

    Also, FWIW: I couldn't follow your instructions from above. In Taxes > Payroll tax, there are no transactions listed in Done (even though I've had two payroll transactions, confirmed). When I click on Taxes > Payroll tax > Payment history, I do see my two transactions. But these are not editable (nor do I see why they would be). So I'm not sure how I would implement your solution.

     

    Thanks for your help!

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