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. 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. Once the money will be retained from the gross earnings, the employee will then receive the take home pay or the net income. There will always be a periodic change in the IRS or the Integral Revenue Services when it comes to the formulas, income brackets, and percentages. 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. 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.
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. The documents that the employer needs to retain are the federal and state W-4s, the original employment application, time sheets, employee reviews, and a 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. 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.