The basic guide of payroll accounting will start on how to get the gross earned amount that is intended for the employee, and you will need to multiply the number of hours that an employee is working to the rate of payment of the company in order to get it. 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 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, in the 1970s, 70 percent of the gross income was the federal income bracket.
The things that will be withheld from the paycheck of an employee are the Federal and State taxes, Social Security, and Medicare. 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.
You need to know that the employer is required 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. If you have any questions regarding the process of payroll accounting, you should take a look at this short article. 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.