Options For Payroll Accounting
The basic guide of payroll accounting will start with the hours worked by a certain employee multiplied to the rate of payment in order to give the gross amount that is earned for the employee. This kind of calculation is usually done every week, every two weeks, or once a month. And there are still some other processes that will be needed by the employer before he or she can issue the actual check to the employee.
Some other factors like the withholdings and taxes will be retained from the paycheck before it will be given to the employees. The money should first be taken from the gross earnings of the employee before he or she will get his or her take home pay or net income. The IRS or Integral Revenue Services will be having a periodic change in the formulas, percentages, and income brackets. For instance, the highest federal income bracket during the 1970s was 70 percent of the gross income.
The things that will be withheld from the paycheck of an employee are the Federal and State taxes, Social Security, and Medicare. The Medicare tax rate today is set at 1.45 percent and the tax rate in Social Security is at 6.2 percent of the gross rate of the employee. Depending on where the employee is in the income bracket, the federal income tax today is ranging from 10 to 35 percent. There will be various state taxes in each state, while there are 7 states that are not imposing 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.
There are also some documents that will need to be retained by the employer. The original employment application, a copy of the W-2 form of the employee, the federal and state W-4s, and the time sheets are the documents that need to be retained by the employer.
You can find in circular E almost all of the things that you need to know when calculating the payroll taxes and withholdings. You can look into the current issues about this by looking for more information about circular E in the internet. If you have any questions regarding the process of payroll accounting, you should take a look at this short article. So in order for you to fully understand the whole process of payroll accounting, you should always remember all the important details and information that is connected in the calculation that will be needed for the payroll accounting.