Reconciliation of General Ledger Liability Account for Unemployment Tax

Submitted by admin on Tue, 05/04/2021 - 15:37
Policy: 

Monthly general ledger reconciliation is completed to ensure that State Unemployment Tax (SUTA) and Federal Unemployment Tax (FUTA) liabilities are accurately recorded in the general ledger. Quarterly these general ledger balances are reconciled to SUTA and FUTA payments made on behalf of employers.

Reconciliations of the employer Federal Unemployment Tax (FUTA) payments and State Unemployment Tax (SUTA) are performed quarterly. A reconciliation of the Federal Unemployment filing, Form 940, is performed annually.
 
These reconciliations are performed to ensure payments made for the employer-related tasks are appropriately accounted and tracked.
 
After performing the reconciliation, a reconciliation statement is prepared by the <<Staff Title>> (or assigned staff), verified, reviewed by <<Staff Title>> (or assigned staff) who signs the bank statement, and stored at <<File Path>>. Signed reconciliation sheets are stored for a minimum of 7 years per File Retention Policy.
Procedure: 

Reconciliation of FUTA and SUTA Liabilities to General Ledger

Performed Quarterly

<<GL Account Number>>
1.      F/EA Accountant prints General Ledger balance for account <<Account Number>>
2.      F/EA Accountant (or assigned staff member) open reconciliation sheet found at <<File Path>>
3.    Enter ending balance for account
4.      Enter sum of each type of tax liability for FUTA and SUTA from F/EA payment documents
5.    Ending balance and sum of liabilities should match
6.    Research and correct any discrepancies
7.    Make necessary adjustments to general ledger
8.      <<Staff Title>> signs and dates reconciliation sheet
9.     <<Staff Title>> passes reconciliation sheet and supporting documents to <<Staff Title>>
10.      <<Staff Title>>verifies completeness and mathematical accuracy
11.  <<Staff Title>> signs and dates reconciliation sheet
 
 
Bank Reconciliation of FUTA and SUTA Payments
Performed Quarterly
Account <<GL Number>>
 
1.       F/EA Accountant (or assigned staff member) review bank account transactions for FUTA and SUTA in Program Operating Account
2.     Sum all quarterly payments made for each tax type from workers F/EA Payment Account found here: <<File Path>> bank download
3.    Create subtotals of payments for each tax type Subtotals with description “IRS USATAXPYMT” are FUTA or 941 payments.
4.    To identify FUTA payments as separate from 941 payments, compare values to EFTPS Batch Provider Payment Inquiry Report
5.     Identify FUTA payments
6.    Payroll department will send a report of the payments made on behalf of all employers with SUTA liabilities for the quarter
7.      Verify these payments have cleared the bank account
8.      After verifying payments have cleared the bank, these payments must be posted to the General Ledger
9.    Compare payments for each tax type to the sum of monthly liabilities for the quarter 
10.  Make applicable adjustments
11.     <<Staff Title>> prints reconciliation sheet and supporting documents
12.   <<Staff Title>> reviews for accuracy and signs
13.   <<Staff Title>> reviews for accuracy and signs
14.   Signed copy is stored for a minimum of 7 years per File Retention Policy
 
Reconciliation of FUTA Quarterly and Annual Returns and Payments
Performed Quarterly and Annually
1.      Per IRS Guidance (Proposed Rules REG-137036-08-1) F/EA makes one aggregate payment per quarter for Federal Unemployment Tax on behalf of all consumers represented by F/EA
  •  A report showing the FUTA liability for each participant employer is produced by the payroll department and attached to the proof of payment
2.      At year-end, form 940 is compared to sum of quarterly FUTA payments
  •   Ensure that line 3 of Form 940 matches sum of gross payment from F/EA Payroll Journal quarterly reports
3.      Obtain an EFTPS Batch Provider Payment Inquiry report for the year for F/EA’s separate F/EA EIN from EFTPS website
4.    Compare Line 13 to EFTPS Batch Provider Payment Inquiry report which shows all payments processed through EFTPS and recorded by the IRS
5.  Ensure line 13 is greater than or equal to line 12 on form 940
 
Reconciliation of SUTA Quarterly Returns and Payments
Performed Quarterly
  1. Quarterly, payroll department makes payments to tax agency for State Unemployment Tax (SUTA)
  2. Each quarter payroll department produces a Transmittal Report for showing the employer, state ID, State Unemployment tax payment, total wages, excess wages, taxable wages, tax rate, Federal ID and monthly workers counts
    • Payments reported on this report have been made to the State Unemployment Agency for SUTA for the quarter
  3. Compare the sum of payments on the Transmittal Report to the amount withdrawn from the program operating account and paid to the State Unemployment Tax Agency
  1. Compare the amount on the “Payment Check Listing” to the amount coming from bank and being paid to State Division of Unemployment Assistance or equivalent on paper check

 

Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

The methods of internal control utilized by F/EA in the Reconciliation of General Ledger Liability Account for Unemployment are:
  1. Each of the supporting documents are reviewed for mathematical accuracy by each verifier.
  2. Each reconciliation document is prenumbered.
  3. Each party initials and dates each reconciliation document displaying confirmation of their review.
  4. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for account reconciliations.
  5. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for account reconciliations.