Payroll Accounting, Taxes, and Reports Chapter 13 Accounting 1 Mrs. Mason Recording Payroll Payroll register column totals are the source of information needed to prepare a journal entry for payroll. Total earnings column of the payroll register is the debit amount for salary expense. This is the amount of money the employees actually earned, before deductions are subtracted. Net pay column is the credit amount for cash. This is the amount of cash that was actually paid to the employees. Journalizing payment of payroll All other columns provide the other credit parts of the entry. These credits become liabilities, so add “payable” to the end of each column heading and you have your liability account. Recording Employer Payroll Taxes Employer’s payroll taxes are business expenses --a payroll expense in addition to salaries paid. Employers must pay four separate payroll taxes. 1. SS tax 2. Medicare tax Federal unemployment tax State unemployment tax Unemployment Taxable Earnings Total earnings subject to unemployment tax is referred to as unemployment taxable earnings. This is calculated by subtracting accumulated earnings from $7000 (the unemployment tax bases) Calculating the unemployment taxable earnings is found on the employee earnings record and the current payroll register. Unemployment Taxes The effective tax rate in most states is 0.8% for federal unemployment and 5.4% for state unemployment. Tax is applied only to the unemployment taxable earnings, not total earnings.
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