Bookkeeper Payroll Reconciliation Checklist

Why reconcile payroll?

Payroll reconciliation is how you verify that the numbers in your accounting software match what your payroll provider actually processed. If you skip this step, errors accumulate. Liability accounts drift out of balance. Tax payments do not tie to what was withheld. By the time you catch the discrepancy, you are digging through months of journal entries to find the problem.

A consistent reconciliation process catches errors the same pay period they happen, when they are easy to fix. Here is the checklist.

Before you post: pre-entry checks

1. Download the payroll summary report from your provider. Get the report for the specific pay period you are about to record. Make sure it is the final report, not a draft or preview.
2. Verify the pay period dates and pay date. Confirm the report covers the correct date range. A common mistake is posting a journal entry for the wrong pay period because you grabbed last period's report.
3. Check the gross wages total. Add up the individual employee wages if you have access to the detail. The total should match the summary. If it does not, something is wrong with the report.
4. Verify tax calculations look reasonable. Federal and state withholding rates vary by employee, but the totals should be in the same ballpark as prior periods unless there were significant pay changes. If federal withholding suddenly doubled, investigate before posting.
5. Confirm net pay matches the bank withdrawal. Look at your bank account. The payroll provider should have debited the net pay amount (plus taxes if they handle tax deposits). Make sure the amount on the report matches the amount that left your bank account.

Journal entry verification

1. Compare every line of the journal entry to the payroll report. This is the most important step. Each line in your journal entry should correspond to a line or total on the payroll report. If your report says gross wages are $8,500, the debit to Salary Expense should be $8,500. Not $8,050, not $8,500.50. Exact match.
2. Verify debits equal credits. This should be automatic if you are using accounting software, but double-check. An unbalanced entry means something is missing.
3. Check that you used the correct accounts. Did federal withholding go to Federal Tax Payable (not Federal Tax Expense)? Did the employer FICA go to FICA Expense (not the FICA Payable liability)? Account misclassification is a common source of reconciliation problems down the road.
4. Confirm the journal entry date. The entry should be dated as of the pay date or the end of the pay period, whichever method you use consistently. Using the wrong date will throw off your monthly P&L.
5. Review the memo/description. Include enough detail to identify this entry later: pay period dates, payroll provider reference number, or some identifier. When you are reconciling six months from now, a memo that says "Payroll" is less helpful than "Payroll JE - 01/01-01/15/2026 - Gusto".

Liability account reconciliation

After posting the journal entry, check that your liability accounts are tracking correctly. This is especially important because these accounts accumulate balances until you make the corresponding tax payments.

1. Pull a balance sheet or trial balance as of the pay date. Look at each payroll liability account: Federal Tax Payable, State Tax Payable, FICA Payable, FUTA Payable, SUTA Payable.
2. Compare each balance to what you actually owe. Your payroll provider should show you the current tax liabilities. The balance in your books should match. If your Federal Tax Payable balance is $3,200 and the provider says you owe $3,200, you are good.
3. Check for stale balances. If a liability account has a balance from two or three periods ago that never cleared, that usually means a tax payment was made but not recorded (or recorded to the wrong account). Investigate and correct it.
4. Reconcile after tax payments. When payroll taxes are deposited (whether by you or by the payroll provider), record the payment against the liability account. The liability balance should drop to zero (or close to it) after each deposit cycle.

Period-end review (monthly or quarterly)

1. Run a payroll expense report for the period. Total up all payroll journal entries for the month or quarter. Compare to the payroll provider's period summary.
2. Compare total wages to the payroll provider's quarterly report. Providers file Form 941 (federal) quarterly. Your books should match the wages and taxes reported on that form.
3. Review year-to-date liability balances. At the end of each quarter, liability accounts should be near zero if all tax deposits have been made and recorded. A growing balance that never clears signals a recording problem.
4. Check for duplicate or missing entries. Sort journal entries by date and look for pay periods with two entries (duplicate) or none (missing). Both happen more often than you would think, especially when multiple people touch the books.
5. Verify worker's compensation accruals if applicable. Worker's comp is often calculated as a percentage of payroll. If you accrue it per pay period, make sure the accrual matches the actual premium when the bill comes.

Making reconciliation faster

The reconciliation itself cannot be skipped, but the time it takes depends on how clean the data is going in. If your journal entries are built manually and you occasionally transpose a number or use the wrong account, reconciliation turns into detective work.

PostBooks reduces that friction by generating accurate, balanced journal entries from your payroll reports automatically. The mapping is consistent every period, the math is always right, and the accounts are always the same. That means when you run through this checklist, everything matches the first time. You spend your time reviewing instead of fixing.