Things That Have To Be Covered In Payroll Accounting
In accounting, a payroll is basically the daily record of all employees of a particular organization who are entitled to get fixed salaries and other employee related benefits and payments. Payroll services can be used for payroll functions for a range of organizations including private companies, self employed individuals and even government agencies. This includes such large organizations like hotels, restaurants, law firms, hospitals, etc. Smaller organizations may use payroll services for instance for generating reports or processing payrolls.
The major part of any payroll procedure is determining the actual payroll. This involves computing the net amount of an employee’s actual earnings and adding bonuses and various other deductions taken into account at the time of calculation. After this, one has to determine the net salary amount of an employee. Net salary is the actual salary less all deductions like tips, commissions, and bonuses and also net amount of actual expenses like housing fare, medical bills, etc. This should always be calculated in a way so as to make sure that the net amount is equal to the actual salary before tax.
The next thing that has to be done after determining the final net salary is to calculate overtime expenses. There are three main classifications in terms of overtime expenses when it comes to payroll processing: standard wage payment, rate of pay, and piecework rate. When one uses piecework rate, the employees are paid for the actual number of hours worked instead of just the usual rate per hour. Standard rate is the amount paid per hour plus the costs for things like taxes, insurance and tips. It is usually used to calculate the gross salary of an individual.
Calculating payroll taxes requires the following process: Add all the employees’ gross pay to the net salary and then multiply the net salary by the applicable federal, state and local taxes. Subtract the total taxes from the gross pay to get the net salary. After doing this, the next thing that has to be calculated is the corporate taxes.
The third thing that has to be calculated is the income tax that the company has to pay to the government every year. In order to calculate this, it is important to know the local laws or codes on the filing of taxes. The local laws determine if an individual pays for self employment taxes or income tax that he or she would have to pay in the office. An employee can also choose to file for an income tax return for an individual social security number or an Employer Identification Number (EIN). However, before filing for an EIN, the employer has to complete the paper work needed for the tax to be filed.
There are other considerations to be made when it comes to payroll accounting. These include the calculation of bonuses and honorariums given to employees and if the company is legally allowed to pay commissions and tips. Every employee and every company has different payroll accounting requirements, so knowing your own payroll processing is necessary to make sure that you are compliant with all the laws and regulations.