- Posted on Jan 30, 2025
If you are a bookkeeper closing out the books each year, you should be reconciling the books to payroll reports. At VBS, we do this monthly, quarterly as well as at the end of the year. As an additional step at year-end, we also tie out to the W3 transmittal.
Every payroll company’s reports differ, but you should be setting up the chart of accounts on the books to mimic the payroll reports, that way ticking and tying is easier to figure out. For instance, if you have salaries and taxes lumped together under payroll expenses, you will need to manually calculate. Separate the salaries from taxes and it will be a better break-out to tie the numbers. Another instance, if all your various payroll tax expenses are set up individually, instead of as sub-accounts of a payroll tax expense account, then you will have to manually add all of them together. Put them as sub accounts, then you can easily tie out the balance.
The reports that you pull from QuickBooks for this process is a profit and loss report, and/or general ledger and customize it only for what accounts you are tying out. Example: Wages on one report, taxes on another and benefits on a third report. If you have them lumped on one, you will need to calculate, let the reports do that for us.
Typical reports that you would pull at the payroll company to tie out payroll would be a payroll journal summary and a tax liability report. The titles of reports may vary depending on your payroll company, but the reports should be a summary report that totals all the payrolls for the period you are reviewing.
Below are examples of the dates you should be looking at for each quarter.
- Quarter 1 – Jan 1 to Mar 31
- Quarter 2 – Jan 1 to June 30
- Quarter 3 – Jan 1 to Sept 30
- Quarter 4 – Jan 1 to Dec 31
The reasoning behind using Jan 1 at each quarterly review is in case there were any changes to a prior periods, you want to review all the months to date together each time.
If the tying to payroll reports went well, but not the same with the W3, it could be that the employer offered employee insurance benefits. Take a look at that.
If the reports don’t tie, look at these things:
- Confirm the data in the accounts and make sure that there are no transactions that don’t belong, as well as in all the other accounts, make sure that all are categorized correctly.
- Review the payrolls month by month, or quarter by quarter and see which month where the discrepancy is in.