How can I book payroll taxes?

mymax: How do you book payroll taxes when it is paid by an outside service?
The taxes need to come out of the bank account for reconciliation. But I also would like to put it into the proper federal and state tax accounts.

Answers and Views:

Answer by McD CPA
Since payroll is done by a third party service, you will have to enter the payroll in via journal entry. The amounts deducted from the bank account will need to be “grossed up” To do this, create a journal entry on the date of the payroll draft. The Journal Entries should something like this.

To record Wages:

Wages – Debit
Federal Taxes W/H (balance sheet acct)- Credit
State Taxes W/H (balance sheet acct)- Credit
FICA Taxes (balance sheet acct) – Credit
Cash (net payroll) – Credit (should match the draft from the payroll company deducted from the bank account.

To record taxes paid (for company and on behalf of employees:

Federal Taxes W/H (balance sheet acct)- Debit
State Taxes W/H (balance sheet acct)- Debit
FICA Taxes W/H (balance sheet acct) – Debit
Companies Portion of payroll taxes (FICA, FUTA, SUTA, etc.) Expense account – Debit
Cash – Credit (should match draft from bank for payroll taxes.

Good Luck!