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JanJaw
October 24, 2022
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Recording 1099 check from outsourced payroll company

  • October 24, 2022
  • 1 reply
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My company started outsourcing payroll.  I run this payroll and import it into Quickbooks.  This works well for "regular" employees.  However, I have my first 1099 contractor included in which I wrote a manual check through Quickbooks Desktop but still had to report to the outsourced payroll company for accurate 1099s.  This was imported along with my other employees in a lump sum.  I need to know how to now record this single contractor payment in QB.  I already paid this contractor using bill/pay and wrote a check.  I didn't expect it to come down from the outsource as a new payment.  How do I repair these accounts so it doesn't look like I'm paying twice, but shows the expense to the proper category (legal expense) and satisfies the invoice. To be clear, a second check was not direct deposited to the contractor.  It was listed as manual, thus recorded only.  So it breaks down to just a bookkeeping issue.

1. Should I delete the QB invoice for the law firm but leave the check, or delete both?

2. Should I create a JE to move the $$$ amount from salaries and wages (how it imported) to Legal Fees

3. How does one show that the proper contractor was paid and satisfies their invoice?

This is very confusing for me as it is my first time paying a contractor through outsourcing.

Best answer by Rainflurry

@JanJaw 

 

The journal entry is: debit bank account, credit salaries and wages expense.  That will increase the bank account and reduce your salaries and wage expense to offset the duplicate entry imported from payroll - assuming I understood your issue properly:-).

1 reply

Rainflurry
Rainflurry
October 24, 2022

@JanJaw 

 

Payment for legal services should not be recorded as salaries and wages.  I'm guessing your payroll company recorded it like that for their purposes, but it's not right for you.  It is considered a legal fee expense and is recorded just like any other vendor payment.  The only thing that makes it unique is that the law firm needs to receive a 1099 at year-end.  I would remove it from the payroll company's entry by reducing the salaries and wages expense debit and the net pay credit by the amount of the check you wrote to the law firm.  It's best to keep it as a check written to the law firm so it is recorded under their vendor account.  Also, make sure that you mark them as a 1099 vendor by going to the Edit Vendor, Tax Settings, and check the box that says 'Vendor eligible for 1099'.

J
JanJawAuthor
October 25, 2022

Okay, I'm almost there, but still have a question about how to make this entry.  They are marked as a 1099 in QB, and our outsourced payroll company will send the 1099s which is why I needed to report a manual check to them so their records would be correct.  However, when I downloaded the outsourced payroll company payroll it included this as though I still needed to write a manual check but I had already done that.  So now I have a bill/payment that went to the law firm plus this additional amount from payroll that appears as though it is still owed via manual check to this same vendor/contractor. (I know how to prevent this in the future by editing how it comes down from the outsourced payroll company) So....

Let's say I paid the lawyer $1,000 for services and satisfied the invoice.  Can you give me an example as to the JE that I would make to correct the inflated salaries and payroll?  What do I debit and credit for the $1,000.  I can apply your suggestions to my actual accounts but I am stuck at the JE. 

Rainflurry
RainflurryAnswer
October 26, 2022

@JanJaw 

 

The journal entry is: debit bank account, credit salaries and wages expense.  That will increase the bank account and reduce your salaries and wage expense to offset the duplicate entry imported from payroll - assuming I understood your issue properly:-).

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