Job costing employee payroll reimbursements in QuickBooks is a function that many users want to perform and they usually expect that they can – with less than desired results. Below is a question that I answered several years ago on the Intuit Community forum.
How do I link a employee payroll reimbursement to a customer’s job? For example:
If an employee pays for something with a personal credit card and I reimburse him via payroll, how do I get that transaction to link to a customer’s job so it shows up in the Job Costs Detail report? When I reimburse an employee, for example, the debit shows up on my P&L under say, Landscape Materials, but how do I get that cost over to the job so I can see it in the Job Costs Detail or at least on a customer’s P&L?
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Here’s my answer:
Unfortunately you can’t job cost reimbursements that are run through payroll – QuickBooks just wasn’t designed to work that way.
To accomplish this you need to do the reimbursements outside of the payroll module, by either entering a bill in Accounts Payable or simply writing a check.
In the Vendor list create a new vendor, if the employee’s name is John J. Doe – create the vendor record as John Doe-Reimbursements.
You can then enter a bill in Accounts Payable for John Doe-Reimbursements and record the reimbursement to a specific account (or accounts) using the Expenses tab and assigning the proper Customer:Job OR you can use the Items tab, select the appropriate Service/Cost Code and select the proper Customer:Job. You would then Pay the Bill.
If you don’t want create Vendor bill, another method to record this is to simply use the Write Check feature and using either the Expenses or Items tab at the bottom of the check job cost out the reimbursements appropriately.
Did you find this tip helpful?
I like DJ’s idea of using a clearing account. Many of my clients in Greater Seattle want to be able to pay their employees one check even though I tell them it is better to pay in two (payroll and reimbursement for job related or other costs).
Thanks for giving that type information.That information is so helpful to us.Will be visit again on your website.
DJ,
Wow, as a tax preparer and payroll provider for my clients I was taken aback by your methodology concerning your employee reimbursements. If your payroll is ever audited, be it from the IRS or the State, I am sure you and your employer are going to be very unhappy.
Whenever possible, it is best to keep employee reimbursements’ out of payroll. The IRS even suggest this in Pub 583 (https://www.irs.gov/pub/irs-pdf/p583.pdf).
To me, In order for this to work, simply write a check made out to the employee from the correct bank account and give it the appropriate expense and Job. Done.
Or
As for the employer paying it all on one check (payday), go to the “Other Current Liability” account that you use to track reimbursements owed to employees and open the register. The employee is the payee, enter the amount due the employee in the increase column. Chose the expense account and record. Then just add it to his payroll check by way of the “Other Current Liability” account.
Either way, there really is no right or wrong way to record a reimbursable expense. It just depends on how the company wants to view the financial statement. But, from my experience (only 26 years), if the IRS sees you doubling this up they may question and will require proof that you are not cooking the books. They will want to know if you have an accountable plan or a non-accountable plan. And you will have to prove to them which one.
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WOW! A positive deduction? Doesn’t that make your payroll reports look — well odd?
I understand the desire for just one check by everyone. However, based on a State Unemployment Audit I was involved in several years ago, where the auditor was very unhappy that the business owner was running reimbursable expenses through payroll and not using an accountable plan, I’m not so certain I would recommend this method – even though it seems to accomplish the task at hand.
The auditor that I dealt with was very insistent that payroll should just be for payroll and that reimbursements for employee purchases should be reimbursed outside of payroll with an accountable plan in place – where the employee submits an Expense Report with receipts attached.
Our guys prefer one check, and my boss prefers me to write one check… I set up a bank account called “Clearing Account.” I set up a payroll deduction called “reimbursements” that posts to the “Clearing Account.” I then enter a positive payroll deduction for the amount to be reimbursed on the paycheck. (QB will make it negative, then you use the calculator in the field to add back double the amount to force it to be positive. Then QB asks if you are crazy and want to do a positive deduction amount – to which I say “yes I am crazy – make it positive…”)
Then I “write a check” for that amount from the “Clearing Account” and post it to the appropriate item or general ledger account and enter the job costing information (customer and class). I usually “write a check” to the actual vendor where the purchase was made – this enables us to track the part or material to the actual place of purchase if needed (returns, buy more, etc…). I make a note as to who actually purchased the item and note what paycheck the reimbursment was made on.
The “Clearing Account” is always zero because the check and the payroll deduction balance each other out. I reconcile the “Clearing Account” every month (balance = zero) so that I make sure I have done both sides of the transaction.