Options For Payroll Accounting
The total of hours that an employee is working will be multiplied to the rate of payment in order to get the gross earned amount for the employee, and that is how you start the basic guide of payroll accounting. You can do this calculation once a month, every two weeks, or every week. There are some other procedures needed by the employer before the employee will get the actual check.
Before the paychecks will be given to the employees, the withholdings and taxes must be retained from the actual check first. Once the money will be retained from the gross earnings, the employee will then receive the take home pay or the net income. There is a periodic change in the income brackets, formulas, and percentages of the IRS or Integral Revenue Services. An example for this is during the 1970s, 70 percent of the gross income was the highest federal income bracket.
The State and Federal taxes, Medicare, and Social Security are the items that will be withheld from the paycheck of an employee. The current tax rate in Medicare is set at 1.45 percent while the tax rate in Social Security is set at 6.2 percent of the gross earnings. The federal income taxes are ranging from 10 percent to 35 percent based on where the employee falls in the income bracket. While the state taxes will be different in each state, and there are 7 states that do not impose income tax. You can search the internet in order to know more about the laws in each states.
The employer should be contributing and calculating an accrued tax every time he or she is figuring the accounting in payroll. The employer should be paying a portion of the state unemployed tax and federal unemployed tax, a portion of the medicare, as well as a portion of social security.
The employer will also need to retain some other documents. These documents are the time sheets, employee reviews, original employment application, federal and state W-4s, and the copy of the W-2 form of the employee.
Most of the things that you will need to be aware of when it comes to the calculation of payroll taxes and withholdings can be found in circular E. You can look into the current issues about this by looking for more information about circular E in the internet. This article will serve as a guide on the answers and process when it comes to any questions you might have about payroll accounting. That is why it is important for you to take note on some of the important factors about payroll accounting in order for you to be more aware on the things that will be happening all throughout the whole process.