Payroll tax problem

[debbieg]

I think I posted some time earlier about not withholding the proper amount of employee social security tax for the pay period that ended last December but got paid on Jan 02 of this year (when the % went back up to 6.2). I made adjustments to later paychecks and withheld the additional amount of money. However, for one of the employees, that was the only paycheck for this year. She is now paid by the preschool and not the church. There were no more paychecks for her that I could adjust to get the extra money. The amount is only $17.72 so I don't think we are going to bother with trying to get the actual money from her. And the IRS has been paid properly so that is not a problem. But it seems like I would need to adjust one of my accounting entries when the IRS payment is made because all of the necessary amount will not be in the "2217 Social Security" account.
Instead of debiting the liability account (2217) should I just debit the payroll tax expense account (5305)?

I hope this makes sense.
Debbie

[JohnDMeyers]

You apparently paid the extra $17.72 at some point, correct?

If so, what accounts did you use for that transaction?

[debbieg]

Yes, John. I went back over all the payrolls and made corrections to the staff and also paid the IRS. However, no entries have been put in the accounting system. (It's a long story but someone else was supposed to have taken over the treasurer position at the beginning of the year. It didn't work out well and now I'm playing catch up to get things straight before the end of the year.)

so, that's my question....how do I make the accounting entry that shows the payment to IRS. Usually it would be something like this.... (fake numbers)

1110 Checking acct...............................2000.00
2217 Social Security.................400.00...............
2219 Medicare.......................100.00..............
2215 Federal Withholding.........1500.00.............

suppose the Social security withholding from employee was $20 short. Then would I just adjust the 2217 entry to be $380 and add an extra entry for 5305.....Payroll Taxes......20.00? I'm assuming that I can't have a liability account be negative.

[JohnDMeyers]

If you needed to pay $300 to Social Security and you only paid $280, then this is how it would look:

From Payroll: Employee #10
DB 01-1110-000 checking $280
CR 01-2217-000 social security $280

From Accounts Payable: Social Security Payment
CR 01-1110-000 checking $280
DB 01-2217-000 social security $280

The main thing you want to do is get the Payroll module correct so that the W2 information will be accurate.

I would create a new Payroll Item called "Social Security Adjustment", or something like that, and add it to Employee #10 in my example.

The Pay Item should do this:
DB 01-1110-000 checking $20
CR 01-2217-000 social security $20

Then process a payroll and only include Employee #10, and only turn on this one Pay Item.

That will make the proper adjustment in the Payroll module.

Then, you have to correct Accounts Payable (or do this directly in Fund Accounting):
CR 01-1110-000 checking $20
DB 01-2217-000 social security $20

There might be a shortcut to all this that I haven't used. One of the PowerChurch gurus might be up on that.

[debbieg]

John,
I actually did create a new pay item called "SSI Correction". I went back to the other employees on a future paycheck and deducted the additional amount of social security from their pay. This means that additional amount was also entered in the liability account. When I paid IRS, I paid the full amount that we owed them. Now that I'm trying to make sure that everything matches up before the end of the year (and W2 time) I realize that there was no correction made to that one employee because she received no additional pay checks from which I could make an adjustment. so, basically, I guess the church will absorb her portion as well as the church's portion of SSI. I am just now getting ready to enter that IRS payment in fund accounting (things are very far behind) and wanted to make sure that I did it correctly. I assumed that I shouldn't pull the entire amount from the liability account because it would be short from that one paycheck.

If I understand your advice, you are saying to move the amount from checking into the liability account and then pay as normal from the liability account? I was just trying to do it in one move that skipped the liability and just took the shortage from our budgeted "Payroll Taxes" line item. Let me know if I am following you correctly.

[Matt]

Debbie,
The payment to the IRS should debit the 2217 account for the full amount, since this was what was actually paid. This will cause a temporary $17.72 debit balance in the 2217 account. Then, you need to go in the payroll module and adjust that employee's Social Security tax withheld to show that an additional $17.72 was withheld using the "SSI Correction" pay item you created. When you post this adjustment it should debit the 1110 checking account and credit the 2217 account. At this point the 2217 account should be cleared. But now you have a $17.72 deposit showing in the 1110 checking account that was never actually made. To clear, you will need to input an entry in Fund Accounting that debits the 5305 expense account and credits the 1110 checking account for $17.72. I would also make a note on this entry that the reason for it is because the church decided to pay for this employees under withholding of the Social Security tax rather than ask for the money from the employee.