qbteachmt
Level 15

"Every thing was paid through quick books payroll program"

There are different ways to "do payroll" through the program. That includes Assisted Payroll, or Enhanced Payroll. Specifically, "someone" actually "did" payroll. Someone ran the numbers, handled the funds, paid in taxes, did the reporting, etc.

"and what I've done put these taxes under taxes expense"

But now you know that is Wrong, so it is time to fix it. Paying it through payroll is a functional error; putting it as Expense is a financial reporting error. That would make this two errors.

"what made me think that I'm wrong, cause this should be deducted from the tax he owes, not from the income."

Nope.It's not deducted from tax he owes. It has nothing to do with his taxes at all. It's just a Big Mistake and it needs to be addressed before you try to work on Business taxes for this person, and before trying to work on Personal taxes for this person. Because everything is wrong: Expenses, taxes paid in, and W2 are all wrong.

Taking funds from the business not for business needs makes it Draw. As I pointed out, one easy way is to treat it all as Draw. The other way is to treat some of it as Draw and the Employer tax component as Other Asset, and now that requires you to split the refunds accurately, to return to him only the Gross Payroll portion.

And Gross Payroll requires that you understand the amount paid in for taxes is not fully Tax Expense and not fully Owner's funds. This is Payroll Math:

Gross wages minus Employee share of taxes held as liability = take home. Then, employer share of taxes are part of liability. Later, by the due dates, all taxes are paid as clearing the Liability; not as Expense. That's why you need to understand payroll and how to unwind this mess. The taxes paid are Errors; they are not "his" taxes.

"I really appreciate your answer, so right now let's say he didn't file form 941"

Okay, but did the tax payments get sent or not? Not reporting is not the same as Not Depositing.

"cause when I asked him about it he said, he never heard of it, or filed it"

Then it seems likely he is not using Assisted Payroll.

"anyway the last payment for him as an employee, was in July, since then I've been his accountant, and I don't recall him filing for any thing"

It still needs to be amended.

"I'm really sorry for the trouble, but If you are a tax expert, or you know to solve this dilemma, I'm willing to pay you."

You posted in the ProConnect software forum for peer users of tax preparation programs for clients' income tax returns. I gave you a link to the QB Community, which is the same concept as Peer Community, but for a different need.

You don't need a Tax Expert. You need to amend the payroll and fix the accounting and deal with the refunds that you need to apply for as part of reversing the mistakes that were made. If this is all new to you, it is time to find a mentor on this issue so that you can learn from it.

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