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Community > Accounting >

Manual Payroll reconcile payroll accounts new to xero

Started by Melissa Jackson -   in Accounting

I am new to Xero. Last week my payroll was setup to run through Xero then I had issues and was unable to get it to work. As a result, I just did a bank transfer to my employees account for the amount of their wages after taxes. Their withholding are still in my business bank account along with my employee portion of the taxes. My questions are within Xero where do I code the transactions? Example below.

Manual bank transfer for paycheck outside of Xero $100 coded to wage and salary (I know this part :) )

Employees withholding (FICA) codes to where?
Employers withholding (FICA) codes to where?
State taxes code to where?
FUTA code to where?
SUTA code to where?

Do I need to create a new bill for those items also?

This really needs to be in the Guide, it comes up all the time. Maybe this will help.


Nancy Wauchope  

Also, the Xero payroll function is about to disappear. Time to search the app marketplace for a payroll provider.

Nancy Wauchope  

Thanks Nancy. I've created the bill, with the following codes:
Salary (gross) - Wage & Salaries
FICA employer - Payroll Tax Expense
FICA employee - FICA (current liability)
SUTA - SUTA (current liability)
FUTA - FUTA (current liability)
Federal Income withholding employee - Federal Payroll Liability
State Income withholding employee - State Payroll Liability

Is that correct? How do I show what was actually paid to me after all taxes?

Melissa Jackson  

Close. Remember, you are recording this in the company books, so you only need to record the company's, not the employee's, expenses. As an example--

$1000.00 Gross pay (wages) expense
$ 76.50 Employer FICA expense
$ 6.00 FUTA expense
$ 10.00 SUTA expense

$1092.50 Total expense (if you prefer, you can record all the tax expenses as one line item)
That's what your bill looks like. Approve.

So what about all the withholdings?

$100.00 Federal withholding
$ 76.50 FICA withholding
$ 50.00 State income tax withholding

$226.50 Total withholdings (remember, this belongs to the employee, not the company)

First, make sure you can apply payments to the current liabilities. Then, since you are not paying them right away, record the withholdings as payments to the liabilities and the net pay to cash. Date all the payments for payday.

$ 253.00 (100+76.50+76.50) payment to Federal taxes payable
$ 50.00 payment to State withholding payable
$ 6.00 payment to FUTA payable
$ 10.00 payment to SUTA payable
$ 773.50 (1000-76.50-100-50) payment to Cash (net pay)

$1092.50 Total payments to clear out the bill

Then later, when you pay the liabilities, record the payment as a Spend Money pointed to the liability account.

Nancy Wauchope