Reconciling the Schedule L on your ICE Submission

By Taylor Bailey

Most companies dread the preparation of the Incurred Cost Submission. The submission is massive, time consuming, and will show any errors that were made in your accounting throughout the fiscal year. One of the most difficult parts of the ICE is the Schedule L.

The schedule L is the reconciliation of labor from the trial balance to labor paid through payroll (taxable wages reported on form 941) during the fiscal year. This becomes difficult, as there are many pieces that must be included to reconcile these two numbers. Some examples of reconciling items include wages accruals, PTO accruals, third party sick pay, payroll deductions, etc. Each year can present different circumstances that will affect payroll. Because of this, there is no template you can rely on to reconcile your Schedule L.

However, there are things you can do throughout the year to make sure your reconciliation is as easy as possible. Most importantly, ensure that all of your labor only post to designated labor accounts. There should not be a mix of consultant costs and employee labor in one account. Non-employee, or 1099, labor needs to be kept in a separate account. Also, keep detailed notes of any journal entry that is affecting the labor accounts. Moving labor between labor and non-labor accounts will cause discrepancies in your reconciliations.

Another best practice is to reconcile your payroll labor to your form 941 each quarter. This will ensure that your 941 return is accurate and will identify throughout the year any discrepancies that might cause trouble on your schedule L. It is easier to catch these items during the same quarter than to search for them at the end of the year.

At Hall Albright, we prepare many Incurred Cost Submissions every year. If you are having trouble with your Schedule L or would like training on how to prepare, please give us a call. We would love to help.

If you have any further questions please contact Taylor Bailey at tbailey@hallalbright.com