Common Bookkeeping Mistakes - #6 Payroll
Payroll can be extremely tricky. So much depends on the laws of your state, how many employees you have, whether those employees are full- or part-time, what type of compensation they receive (salary? hourly? commission? etc.), what benefits you offer...the list can go on and on!
One big mistake that some employers make is to record the net amount paid to employees as Payroll Expense. If you are doing this, you are understating your expenses and overstating your net income, resulting in higher income taxes! The GROSS amount of the employees' pay must be recorded as Payroll Expense, and the tax/benefit liabilities must be recorded as Payroll Liabilities.
For more simple payroll needs, QuickBooks Online Enhanced Payroll does pretty well...I use it with one of my clients, and it serves their purposes just fine. But once we get into more complicated payroll situations...health insurance, 401(K)s, etc....I highly, HIGHLY, HIGHLY recommend using a third-party payroll service. That is their expertise! If you are struggling with your payroll situation, contact me, and I can help you find someone to ease that burden. (And the fees you pay a third-party service are a payroll expense...tax deductible!)