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.
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 State and Federal taxes, Medicare, and Social Security are the items that will be withheld from the paycheck of an employee. 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 tax today is ranging from 10 to 35 percent that will be based on the income bracket where the employee falls into. 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. 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 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. 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.