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. You can perform this kind of calculation every week, every two weeks, or every month. There are some other procedures needed by the employer before the employee will get the actual check.
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. There is a periodic change in the income brackets, formulas, and percentages of the IRS or Integral Revenue Services. For instance, in the 1970s, 70 percent of the gross income was the 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. 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.
There is an accrued tax that should be contributed and calculated by the employer every time he or she is figuring the payroll accounting. A portion of the social security, a portion of medicare, and a portion of the state unemployed tax and federal unemployed tax should be paid by the employer.
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.
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. This article will serve as a guide on the answers and process when it comes to any questions you might have about payroll accounting. There are so many things that you need to take note and be more aware of in order for you to really understand all the things that is revolving around the process of payroll accounting.