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Accounting and COVID-19

As a result of the passing of the Families First Coronavirus Response Act (H.R.6201), small businesses will be able to take credits against their federal tax liability if the small business pays out wages that are classified as either emergency sick time pay or family medical leave of absence pay.

In order to properly track the amount of the credit and apply the credit to the federal tax owed, Gusto will pass the amount of the eligible credit through to your Xero and Quickbooks integrations. 

Important: This will require the set up of new mappings to accounts in your accounting software. We strongly encourage consulting your accountant in the mapping of these accounts.

Here’s how it works

  1. Sign in to Gusto.
  2. Begin processing payroll as usual from the Run Payroll tab.
  3. On step 2 of payroll, select Enter emergency leave.
    • You must report the emergency leave and fully process a payroll one time before the new mappings will appear.
  4. Enter the emergency leave, any other payroll detail, and submit the payroll.
    • On the confirmation page, you’ll see that the payroll did not successfully sync to your accounting platform - this is expected, one manual sync is required to begin the automation of this on future payrolls.
  5. Navigate to your Dashboard and click the notification asking you to complete the missing mappings.
    • You can also complete the mappings by clicking Settings > Integrations.
  6. The following mappings will appear when the credit is utilized - all must be synced to an account in your accounting software:
    • Emergency Leave Wages (expense account)
    • Emergency Sick Leave Credit - Care for self (asset account)
    • Emergency Sick Leave Credit - Care for others (asset account)
    • Family Medical Leave of Absence Credit (asset account)
  7. Once the mappings are complete, you’ll need to manually sync this payroll to your accounting software.
    • To do so, click Reports > Payroll History > View details (under applicable payroll) >  Sync (at the top of the payroll detail page).
  8. Confirm a timestamp was populated for the sync, confirming the data was pushed over. 

Your payroll entries will include two new components: 

  • We’ll accrue the amount of the credit (i.e. increase the amount of the credit asset). 
  • We’ll apply the credit as payroll is processed (i.e. reduce the same credit asset amount based on the amount of tax we can offset in the specific payroll run.
    • Keep in mind: There will not be a separate entry for the credit only.  

There’s no action required on future payroll runs if the accounting integration is set to auto-sync entries. You can pull the remaining balance of the credit in your accounting software at any time as a line item on your balance sheet.  

Payroll, benefits, HR and more.