Tracking Payroll Taxes for One Employee with Two Monthly Paychecks

You should not have her listed as two employees; because she should only get one W-2 from your company. Also, I'm not sure why you want to separate the payroll taxes in this way.

What you can do is to create a new wage item for administration, and mark that as one of the wage categories for Jane. Set it up to post to a different account from other wages so you see the result in the profit & loss statement. You can also use classes, and code the paycheck items, including payroll taxes, to the respective class. When you create a P&L with classes in the columns, you'll see the taxes related to her administrative wages in the same column as those wages.

Dear Thomas,

Thanks very much for this reply. Very helpful. I've set up the administrative paycheck as a Class item, so I'm now able to generate a report that just pulls data from those administrative paychecks.

But I've run into another quirky thing. I'm setting all this up so I can obtain data to fill out federal form 990 for nonprofits. That form requires me to give a breakdown for payroll taxes for direct service and for management or administrative salaries. The class I've set up works fine to track Social Security and Medicare payroll taxes paid by the company for direct service for Jane versus her administrative paycheck. But it gets weird when regarding two of California's taxes: Employment Training Tax (ETT) and Unemployment Insurance taxes (UI). Each of these taxes has a $7000 per year wage base and the company pays 1.5% and 0.1% respectively.

But keep in mind that Jane gets two separate paychecks per month, one for administrative and one for direct service. Both checks are issued on the last day of the month. QB is watching for the $7000 wage limit to be reached, and it's looking to both of these paycheck gross amounts as a base for calculating when the wage limit is reached. What this seems to mean is that QB is taking that percentage out from one check and then the other check.

Specifically, the QB report (filtered for her administrative salary only) shows that the annual 2004 ETT taxes paid for her were $1.90. The TOTAL paid by the company for her two salaries combined were, in fact, $105.00 for ETT. Beginning with the third paycheck of the year, QB looked to the direct services paycheck to calculate the bulk of the ETT taxes due from the company for the year.

I hope this is clear. Again, my main goal is to obtain data for the Form 990 so I can accurately report on the amount of payroll taxes paid for administrative versus direct services. But the QB method and subsequent report seems to skew these figures.

Any guidance on this, perhaps?? Much appreciated!

....Jason

The proper payroll tax calculations are an excellent reason why you need to treat her as one employee in QB or you will overwith hold taxes on her.

QB will see each paycheck in sequence and calculate the taxes until the $7000 is met. If the large paid job is paid first the end result is that the bulk of the taxes will come out of those paychecks. I doubt that there is anything that you can do in the way the paychecks are coded/posted. As you have discovered, SS and Medicare are working fine because these are a straight percentage with no cap.

I think the simplest solution is to go back into the paycheck detail and reallocate the ETT tax expenses to the 2 classes based on a percentage of her total pay. So if 25% of her pay goes to the admin function then 25% of the payroll taxes should go to admin also. Do a journal entry each month to reclass the $ between the 2 classes that you set up. Once she has reached $7000 in total pay you won't have to do the journal entry anymore. Then run a report on the tax expense account by class to get your new totals.