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. 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.
Before the paychecks will be given to the employees, the withholdings and taxes must be retained from the actual check first. The employee will receive his or her take home pay or net income right after the money will be retained from the gross earnings. 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 Social Security tax rate is at 6.2 percent while the Medicare tax rate is set at 1.45 percent of the gross earnings 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 are 7 states that do not impose income tax, but the state taxes in the rest of the states will be different. 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. 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.
There are also some documents that will need to be retained by the employer. 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 different websites in the internet in order for you to be aware on the current issues revolving this matter. If you have any questions regarding the process of payroll accounting, you should take a look at this short article. 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.