U2 Wages Reconciliation

This workpaper reconciles the salaries and wages of employees with payroll records, PAYE returns filed and payments made.

Suggested supporting documents

  • PAYE returns
  • IRD account look up information
  • payroll system summary of monthly transactions
  • general ledger transaction reports
  • bank statements

Reconciliation of PAYE returns filed

Enter details of salary and wages calculated as per the client’s payroll system and compare with what has been reported and paid to the IRD:

  1. Actual gross – enter the total gross salary and wages payable each month as per the payroll system records
  2. Returned to the IRD – enter the total gross salary and wages payable each month as per the PAYE returns or IRD account look up information
  3. PAYE – from payroll system records enter the total PAYE and/or schedular tax deducted from employee’s salaries and wages during the month.
  4. KiwiSaver employee deductions – from payroll system records enter the total of KiwiSaver deductions made by employees during the month.
  5. KiwiSaver employer contributions (net) – from payroll system records enter the total of KiwiSaver employer contributions made net of ESCT during the month. ESCT is required to be deducted from employer contributions (refer MTG ¶29-420).
  6. ESCT – from payroll system records enter the total ESCT (employer’s superannuation contribution tax) deducted from employer KiwiSaver contributions during the month.
  7. Student loan – from payroll system records enter the total of student loan deductions made from employee’s salaries and wages during the month.
  8. Child support – from payroll system records enter the total of child support deductions made from employee’s salaries and wages during the month.
  9. Actually paid to IRD – review general ledger and enter actual amounts paid to IRD in respect of each month’s PAYE return liability.
  10. Variances in column O represents under or overpayment to the IRD in respect of PAYE returns required.

The client may be prosecuted by the IRD for failure to pay PAYE to the IRD on time (refer MTG ¶14-250).

Payment of remuneration reconciliation

Ensure payments made to employees reconciles to payroll records.

  1. Allowance and deductions (column P) – record details of any tax exempt transactions that occurred during the month in order to reconcile payroll records with actual payments made to employees:
    1. Enter sum of any tax exempt allowances paid to employees during the month as a negative number.
    2. Enter sum of any tax exempt deductions made from employee’s salaries or wages during the month as a positive number.
  2. Net paid actual (column E) – from the general ledger or bank statements, enter the total amounts of payments made to employees during the month.
  3. Variance – where there is a variance review whether allowances and deductions have been treated correctly for tax purposes, review transaction reports to ensure correct payments have been paid to employees.

Create journal

Where missing transactions or errors have been identified, create a journal to update the general ledger.

See Create a journal manually for further assistance.