Payroll liabilities are amounts your business owes to employees, tax authorities, and benefit providers after each pay run. They live on your balance sheet as current liabilities until you remit payment. Here's what every bookkeeper needs to track.
Complete list of payroll liabilities
| Liability | Owed To | When It Clears |
|---|---|---|
| Federal Income Tax Withholding Payable | IRS | On tax deposit date |
| Employee Social Security Payable | IRS | On tax deposit date |
| Employee Medicare Payable | IRS | On tax deposit date |
| Employer Social Security Payable | IRS | On tax deposit date |
| Employer Medicare Payable | IRS | On tax deposit date |
| State Income Tax WH Payable | State revenue dept | On state deposit date |
| FUTA Payable | IRS | Quarterly (if over $500) |
| SUTA Payable | State unemployment agency | Quarterly |
| Health Insurance Payable | Insurance carrier | Monthly premium due date |
| 401(k) Payable | Plan administrator | Within 7 business days of pay date |
| Net Wages Payable | Employees | On pay date (ACH settlement) |
How payroll liabilities appear on the balance sheet
All payroll liabilities are current liabilities (due within 12 months). After each pay run, your current liabilities increase. As you make tax deposits and benefit remittances, they decrease. A correctly maintained balance sheet shows only the unremitted amounts at any point in time.
Reconciling payroll liabilities monthly
At month-end, reconcile each payroll liability account balance to an external source (payroll register, tax deposit records, insurance invoices). The balance should equal what you owe but haven't yet remitted.
PostBooks generates the journal entries that create these liabilities correctly every pay run. Try it free.