Having trouble matching P&L & Payroll Summary due to deductions

Hi All,

I did the payroll end of year with Clayton Oates this morning, which was fabulous.

I've gone through and cleaned up all my payroll items & now I'm trying to match my Salaries & Wages from the P&L with my Adjusted Gross Pay on the Payroll Summary.

I'm out by the amount of the Deductions from Gross Pay. This says to me I've done something wrong with my Deductions. I had just coded all deductions to a bank account "Payroll Deduction Clearing Account".

I think I've done something wrong as those amounts are still showing up in my Salaries & Wages on the P&L.

Any advice is appreciated.

Comments

John Graetz

Hi Michelle. It is a little bit hard to try and work out exactly what your problem is - some more information would probably help. Just in trying to understand what you are saying, it seems to me that perhaps you have set up the Payroll Item incorrectly, or else there could be another matter. So I will provide two possibilities:
1. If your deductions are from after tax salary (the usual situation), they are not subject to withholding tax nor are they a deduction from Gross Pay for your P&L as they are not a salary item. Your gross pay figure will only be reduced by deductions which are "taxable", that is, they are an isolated allowable deduction for tax purposes e.g. FBT, but again,theoretically this should not be reducing Gross Pay in your general ledger, If you have FBT, it really depends on how you have set this up. In my own case, I do not have anything that reduces my Gross Pay in the general ledger.
2. Have you perhaps got the deduction item not set up correctly? I would be looking at editing your deduction and seeing what it says. On the second screen, there is provision for nominating the liability account to which the deduction is coded. Traditionally this would be to Payroll Liabilities, however you have indicated that it is going to a special bank account which should serve a similar purpose. The next screen is Tax Tracking Type. What have you got this set to? It should be set to None. If perchance you have got it set to Gross Payments then that is where your problem lies.
If neither of these possible solutions relate to your problem, then please provide a bit more specific information as to what your are doing or what is happening.
John L G

Mooshie Ervin

Thanks John, my general deductions were not set up correctly, which I have now resolved thanks for your amazing input! Much appreciated.

I think now it's just my Super Salary Sacrifice that I need to resolve, would this tax tracking type be Gross Payments?

And I'm wondering why it's not reducing from my P&L, but then it wont allow me to select an Expense account to separate this amount from my general Salaries & Wages. I think perhaps I've set this up incorrectly?
?

John Graetz

Hi Michelle. One down (excellent) and one to go. Yes, the tax tracking type should be Gross Payments, meaning that for the purpose of calculating tax, the Salary Sacrifice amount, which is an allowable taxable deduction, will reduce the amount of tax payable. But, this again is not something that is deducted from Gross Salary in your general ledger. Gross Salary relates to the total amount that you have to pay your employee. The Salary Sacrifice belongs to the employee and so is not a deduction from Gross Salaries, otherwise you will be understating the amount that you actually have to fork out to pay them. These items are not a company expense, but like other deductions, they are a company liability, that is, the employer is liable to have to pay this deduction to somebody. Again, it is usual to code this to the general ledger liability account Payroll Liabilities, which is in the balance sheet section of your general ledger. Hope that this helps you.
John L G

Mooshie Ervin

Thanks John,

I think maybe I didn't explain my query very well! I'm all muddled up haha It's been a very long day.

This morning when I did year end with Reckon webinar, they had their salary sacrifice amounts separated in the P&L from their Salaries & Wages, so I'm wondering how did they did that & why it's not working for me.

This would allow me to reconcile the end of year payroll better.

It should look a bit like this in the P&L

Expense
   Payroll Expenses
     Salaries & Wages - $XXX
     Salary Sacrifice     - $XXX

Then I would match my Salaries & Wages balance with the my Adjusted Gross Pay to get a reconcile.

I'm fairly certain though, It would still be considered a good match if my Salaries & Wages on the P&L matched my Gross Pay on the Payroll Summary, but I just wasn't certain.

Thank you so much for your time John.

John Graetz

Wow - in all my years I have never seen salary sacrifice super set up this way. I am somewhat reluctant to comment further because what I would say would likely go totally against what you learnt in your webinar this morning. To me this is a very cumbersome way of doing things, particularly as staff have a penchant for changing the S/S Super throughout the year. However, in an effort to assist you do what you learnt this morning, I see things panning out like this. I use this example. I preface this by noting that Salary Sacrifice (Super) is set up as a sub account of Payroll Expenses. So here we go:
1. Assume that the gross salary for the employee is $52,000 ($1,000 per week) and the salary sacrifice super is $5,200 ($100 per week).
2. The salary items presumably would then be set up something like this:
A) Salary (less S/S Super) $46,800 - coded to the expense account Salaries & Wages sub account

Salary Super Sal Sacrifice $5,200 - coded to the expense account Salary Sacrifice sub account.
To my mind you would need to title the payroll items much the same as what i have suggested above so that the employee can understand where or how their gross salary is made up.
I am also wondering at this point whether the seminar talked about Salary Sacrifice Super or whether it referred to Salary Sacrifice in the form of Fringe Benefits. If it was the latter, then I can understand what was being taught. There are different schools on how FBT is set up, but the above way is not the way that I have ever done it.
If what you learnt is similar to what I have suggested in 1. and 2A and 2B, you would need to be very careful how you set up the payroll items, because of the following:
3. The salary sacrifice super deduction item would normally show on the pay slip as a deduction with the tax tracking set to gross payments
4. On that basis, if you are going to split your salaries into two components, the Salary Super Sal Sacrifice would need to have tax tracking set to gross payments, otherwise there would be a double deduction for tax purposes.
This has started to get rather complicated, but I hope that it might help you.
John L G

Mooshie Ervin

Thank you for all your help John.

I've managed to get all the payment summaries done now for 3 companies. Appreciate your time and energy.

John Graetz

Thanks for the response Michelle. Pleased that it all worked out for you in the end. John L G