Doing payroll without Wave payroll service
HLA
Member Posts: 4
Is this possible and how do I do it? I need to record gross wages, vacation, what the employee puts into retirement and what they pay into employee taxes out of their payroll. I also need to record the payments by the employer to payroll taxes against what's taken out of the employee's paycheck. Thank you.
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@HLA,
Yes, there are various providers for full service payroll including Wave and myself (plug here). You have to decide whether having a payroll service is worth the cost. I can tell you from experience that many small business owners have a tough time keeping up with all the payroll computations, record keeping, and filing obligations. The penalties for missed filings and payments can be severe. What question do you have specifically. Payroll transactions come through the bank, so categorizing them correctly will keep your books up to date.
We only have 2 employees and have been doing payroll successfully for several years. We don't use or need payroll services and we only have a bookkeeper come in each quarter to file the quarterlies and check on transactions. I don't miss tax payments because I process those on the same day I do payroll. So I just really want to process and enter payroll on my own. Just need to know how to do that in Wave. It's unclear whether entering the employee information means that I'm signing up for their service.
Oh, and thank you for the response. I really do appreciate it.
@HLA,
Not a problem. Glad to hear you've been successful at it. I'm not really sure what you mean by "process". You still have to do the gross to net computations.
There are 2 ways to get payroll on your books. The simplest way is to code employee net checks and payroll tax payments as Salary and Wages. At some point you would need to do a journal entry to move the employer payroll tax expense out of salary and wages to Employer Payroll Taxes. Most of my clients handle it this way. The reason why is that employers get a deduction for gross + employer payroll expense. Your employees are paid net and the taxes you are remitting gets you to gross. The extra you are remitting is the employers portion of FICA. The second method is through a gross to net journal entry. This is where you create a journal entry to record gross. You would categorize net checks as Salary and Wages. You would categorize all tax payments to Payroll Tax Liabilities. The entry is as follows:
Debit Salary and Wages (for gross)
Debit Employer Tax expense (gross * .0765)
Credit Payroll Tax Liabilities (Withholdings+FICA+Employers Tax expense)
Credit Salary and wages for net pay
You now have effectively grossed up wages and posted you payroll liability. When you make federal and state withholding payments, they would categorized against Payroll Liabilities. Your SUTA and FUTA payments would be an expense.
Saw your second post. Your welcome. BTW my service runs $24 a month for your situation. That's everything, all tax payments, forms filed, W-2's, direct deposit, etc.
Best of luck.
Thanks again Mike. I'm sure our bookkeeper will understand this better than me : ). Again, greatly appreciate it.