The Choices For You In 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 before the employer can provide the actual check to the employee, he or she will require some other procedures.
The withholdings and the taxes should first be retained from the actual paycheck before the employee will receive it. 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. An example for this is during the 1970s, 70 percent of the gross income was the highest 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 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. 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 discover more about the state law in each state by searching in the internet.
Every time the employer is figuring out the accounting in payroll, he or she needs to calculate and contribute an accrued tax. 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. 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.
Almost all of the things that you need to be aware of when it comes to calculating the payroll taxes and withholdings can be found in circular E. There are a lot of websites in the internet that you can look into if you want to know more information about the current issues. This article will serve as a guide on the answers and process when it comes to any questions you might have about payroll accounting. That is why it is important for you to take note on some of the important factors about payroll accounting in order for you to be more aware on the things that will be happening all throughout the whole process.