Accounting 101 - How to enter a salary transaction in Wave?

jgold723

OK, I was able to do this in Quickbooks, but I can't figure out how to do it in Wave.

I have a salary check of $1,000. Of that $200 is withheld for FICA and taxes and another $200 is withheld for a retirement plan. The actual check written is $600.

In Quickbooks I recorded this as a $1,000 salary expense with the other amounts listed as negative amounts as "Other Current Liability" accounts.

I can't seem to do this in Wave. If I try to split the salary transaction, The liability account amounts are added to the salary, not deducted from it.

Can someone point me in the right direction?

Thanks!

Mikeg

jgold723,
Not sure that it can be done that way. One option is to do a journal entry. First categorize the net pay as salaries. Next the journal entry:
Debit Salaries 1,000
Debit Employer Tax expense 76.50
Credit Payroll taxes payable 276.50
Credit Pension Payable 200
Credit Salaries 600

I took the liberty of adding the employer portion of FICA on the gross. Assuming wages is below the FICA floor.

To summarize, your salaries are stated at gross and payroll/pension are added to liabilities. The credit to salaries of 600 negates the original categorization of net pay.
Hope that helps!

jgold723

Ah, thanks Mike, that is helpful.

jgold723

I'm curious though -- is there a different way to handle payroll in Wave? I do it manually because there's just one salaried employee and it worked fine in Quickbooks. But if there's an actual payroll method I should use, I'll do it.

Mikeg

jgold723,
Second option would be to expense net and expense the tax and retirement payments as salaries. The logic behind this is that employers deduct gross salaries. When you expense the deductions that were taken to arrive at net you effectively get gross. There are some adjustments that may have to be made at the end of the year. First one is to move the employers FICA from salary expense to Employer Tax expense. The second adjustment would occur based on any outstanding liability to the retirement or payroll taxes.
For my clients, they most use my full payroll service. Runs only $22 a month for 1 employee. The taxes are always taken at every payroll run so there is never an outstanding liability for taxes.