Payroll was ran at the end of the year. IRS didn't deposit until the next year. Should the employers part of FICA be counted as a liability?

[Golfer2016]

A bonus was made payable in December 2018.  I know that the bonus amount and the employees share of taxes are a liability on the balance sheet.  And the bonus can be written off in 2018.  However for the employers share of taxes that are due, is that a liability on the balance sheet?  They aren't written off until they are paid (2019), but I am not sure if I should put as a liability on the balance sheet.  Thanks.

[qbteachmt]

"They aren't written off until they are paid (2019),"

The employee share of taxes are part of their gross pay. The date you pay the employees is the date you incur the Total Expense. The Banking (payment to State and Feds) is not the date of Expense; it's the date of Banking.

The same is true of the employer's share: it is Debit Expense and Credit Liability, owed for the pay date. Not the Banking date.

The fact that you "wrote it off" as 2018 means you should already have the liability entered; otherwise, you cannot have the Gross Payroll entered. The math is:

Gross Expense is the Debit.

Credits go to bank (for takehome), tax liability, and perhaps the employer's expense or asset account as reimbursement, such as Health Insurance premiums or employee draw/advance repayments.

Then, later, when you reach the tax payment due date, you pay out Liability; it's not expense at this point.

[Golfer2016]

Thanks.

So you're saying the bonus can't be written off in 2018 because it didn't hit the employees account?

[abctax55]

If you "put it on" as a liability,  what are you planning on debiting (if not payroll taxes...) in order to keep the balance sheet *balanced*?

[Golfer2016]

It balanced by be not including the employers's portion as a liability.  The next tax year, I will include the employers payroll tax portion as a deduction for which they will get the write off in that year. 

[Golfer2016]

I'm reading this as I would add the employers share to the liability, and write it off in 2018, even though it wasn't withdrawn from bank until 2019.

[qbteachmt]

"The next tax year, I will include the employers payroll tax portion as a deduction for which they will get the write off in that year."

That isn't how Payroll in the US is treated. You are confusing Banking and P&L.

"So you're saying the bonus can't be written off in 2018 because it didn't hit the employees account?"

That's right. Payroll is a cash-basis event. If you don't pay it, it isn't expense. And the employer liability is triggered because you paid payroll, which makes the Pay Date the date as expense for everything we are discussing.

Gross Wages + Employer taxes = total expense for that pay date

The banking is:

Takehome pay + Liability (to be paid later) for that same date 

The Tax Due Date might be 3 business dates, monthly, or even the 940 might be once a year.

There are a few things different for accrual entities, such as governmental units.

[Golfer2016]

Hi, I think you're asking the other poster too, right?

I'm reading his comment as he would put the liability on the pay date, but not debit expense (IE write it off the next year).  Then the balance sheet wouldn't balance, right?  

[qbteachmt]

You were being asked: What is your offset for liability, if you only want to enter the liability now? That isn't really possible.

As I pointed out, Payroll Expense is a Gross event for the pay date. Gross = All. That means payroll math for the pay date is:

Total Expense, broken out by either Banking (checks issued as takehome) or as Liability (amounts to be paid out later). And Later, the rest of the Banking happens, as you pay out those liabilities.

And you stated "payroll was ran" at the end of the year, but you also stated it was Payable. Was it Paid to the employees with the pay date in Dec 2018? The date it hits their bank isn't the company's pay date. Examples:

You print checks dated 12/31/2018. That makes this Payroll for 2018, included in the 2018 941/944 reporting, in the 2018 W2, and Gross Payroll in the expense accounting. You also direct deposit, and that doesn't hit the employee bank accounts until Jan 2, 2019 (the next banking date for deposit); but the employer bank has the initiation date for 12/31/2018. That makes it part of the same 2018 year end payroll as the paper checks.

If you calculated what everyone should get, but didn't issue it until a Jan 2019 paydate, that makes it a January 2019 payroll.

And the liability pay date is not the Payroll date for expense; it's the Due Date for the banking, or you are considered late making that payment.

[qbteachmt]

Let me address this statement: "I know that the bonus amount and the employees share of taxes are a liability on the balance sheet."

The Bonus amount already includes the employees' share of taxes. There is no separate amount for this; that's where it comes from. A Governmental Entity would accrue a Bonus as gross expense at year end, but then Reverse it for Jan, then pay it out as Expense in Jan. This avoids taking it as expense twice. You need to understand the accounting requirements for the entity you are managing, of course.

[Golfer2016]

So does the client right off employers FICA in 2018 (and include it in a liability)?  They are cash basis.  

[qbteachmt]

The Payroll Date is what matters. The date on the paycheck. That is the date of Payroll. You do not use as Expense the date we did the banking of payment to the IRS, because that is not Payroll Math. Payroll Math is not correct unless you have all the amounts. Expense is Gross Payroll, not Banking amounts.