Why is the workers comp worksheet not equal to QBO workers comp accrual?

The Workers' Comp Accrual in QuickBooks Online (QBO) Payroll may not equal your manual worksheet calculations because the QBO accrual is typically based on the rates and setup within the payroll system, NancyC1. I'll explain the most common reasons for the discrepancy.

Here are the most common reasons why the QBO accrued premium might not match your worksheet:

• Incorrect Rates or Experience Modifier: QBO's calculation uses the Workers' Comp Class codes and rates you have entered. If the rates in QBO are outdated, were entered incorrectly, or do not include your current Experience Modification Factor (Mod), the accrued amount will be wrong.
• Exclusion/Inclusion of Specific Wages: Workers' Comp premiums are calculated only on "subject wages." State laws and your policy may exclude certain pay types (like overtime premium pay, severance, or specific benefits) from the premium calculation. Your manual worksheet might correctly exclude these wages, while QBO's setup for a specific payroll item might incorrectly include or exclude them from the Workers' Comp calculation.
• Payroll Item Setup Errors: Each pay type in QBO (e.g., salary, hourly wages, bonus) must be correctly mapped to the appropriate Workers' Comp Class Code. If a wage type is incorrectly assigned, it can throw off the accrued amount.
• Lump-Sum Policy Payments vs. Accrual: If you're making lump-sum or estimated periodic payments to your insurance company instead of using a Pay-As-You-Go feature, the accrued liability in QBO will accumulate based on payroll, but the actual liability on your Balance Sheet will be offset by those non-payroll payments, requiring manual adjusting journal entries to reconcile.

For quarterly adjustments, yes, you will need to perform this task. QBO's payroll calculations are estimates based on current rates and subject wages, so it's common to see a discrepancy between the accrued liability and the actual premium owed. You can calculate the actual premium on your worksheet or receive it in a bill from your insurer.

Here are the steps for adjustment:

1. Run a Workers' Comp Report: Use the Workers' Compensation Detail report in QBO for the quarter to get the total subject wages for each class code.
2. Calculate Actual Premium: Use your official rates and Experience Mod to calculate the actual premium owed for that quarter based on the subject wages from the QBO report (this is your worksheet calculation).
3. Compare Balances: Compare your calculated actual premium to the current Accrued Workers' Comp Liability account balance in QBO for the period.
4. Create an Adjusting Journal Entry:

• If the actual premium is higher than the accrued balance, you need to Debit an Expense account (like Workers' Comp Expense) and Credit the Accrued Workers' Comp Liability.
• If the actual premium is lower than the accrued balance, you need to Debit the Accrued Workers' Comp Liability and Credit the Expense account (this would reduce the expense).

This quarterly process helps ensure your financial statements are accurate throughout the year and prevents a single, massive adjustment at the end of your policy period (the annual audit).

Should you have other questions in QuickBooks, please let me know. I’ll be happy to assist you further.