Six Steps to put Payroll in Quickbooks

New payroll items are mapped to an expense account in QuickBooks called Payroll Expenses, but you can edit your payroll items so they post to any expense account you wish. However, each payroll item can only be mapped to one expense account which causes problems when you want to allocate field labor to cost of goods sold and admin labor as a regular expense. You can get around this by establishing two payroll items for each of your payroll expenses - one mapped to a cost of goods sold account, another mapped to a payroll expense account - with one important exception, payroll taxes. Because QuickBooks requires that you use one payroll item for each federal and state tax, you are forced to choose between mapping your payroll taxes to an expense account and understate Cost of Goods Sold or a Cost of Goods Sold Account and understate Payroll Expenses. Many QuickBooks consultants recommend that you prepare a journal entry each month to move your payroll taxes into the correct category. But there is a way to automate this.

1. If you haven't already, create payroll tax accounts under cost of goods sold and expenses. Go to Lists > Chart of Accounts, click on the Accounts button, and select New. The cost of goods sold type is one of the Other Account Types. You may want to create sub-accounts for each payroll tax. You can do this by creating a parent account called Payroll Taxes, checking the box next to Sub account of, and entering in the Payroll Tax account when creating the sub-accounts. Note: the sub-account types must match the parent account selected.

2. Go to Lists > Payroll Item List and edit your payroll tax items to map to the Cost of Goods Sold payroll accounts you created above.

3. Click on the Payroll Item button and select New. Create an Addition payroll item called

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