Question

What is the connection between the employees' earnings records and payroll tax reporting?

accounting 145

Mcgraw Hill

Answer 1

connection between the employees' earnings records and payroll tax reporting.

A payroll register is the record for a pay period that lists employee hours worked, gross pay, net pay, deductions, and payroll date. In other words, a payroll register is the document that records all of the details about employees’ payroll during a period. It is a summary of all the payroll activity during a period.

Payroll deductions are listed after the gross pay has been calculated. FUTA, SUTA, FICA and other deductions are subtracted from the gross to show the net pay for each employee during the payroll period. The payroll checks are then written for the net pay.

Employees' earnings records contain details of payroll tax reporting and may be considered as source documents.

Many employers will also have year-to-date totals on the report for each employee. This way gross pay and deductions can be tracked easily throughout the year.

Bookkeepers use the payroll register not only to write the payroll checks, they also use it to file the quarterly payroll reports and remit the tax payments to the state and the federal governments. The year-end W-2 reporting is also based on the payroll register. In other words, it includes all the information to record the payroll in the payroll journal and comply with all of the proper payroll filings.

With computerized accounting systems, a new payroll register or report can be run at any time for any payroll period. Manual ledgers are rarely used, if ever.

There are multiple ways employees can be paid: Hourly, Salary, or Commission. Regardless with the method the employer chooses to use, all employers just deduct payroll taxes from employee pay. Some taxes the employee pays. Some taxes the employer pays. Some taxes both the employee and employer pay. Below is a review of the different payroll taxes with a summary of who pays the tax ...

Tax	Employee Pays	Employer Pays	How Calculated
Federal Income Tax	X		Tax Tables
Social Security Tax	X	X	% of Tax Base
Medicare Tax	X	X	% of Total
State Income Tax	X		Varies
Federal Unemployment Tax (FUTA)		X	% of Tax Base
State Unemployment Tax (SUTA)			% of Tax Base

Each employee has an earnings record where his/her individual earnings are summarized in one place for each quarter. This earnings record is used to prepare tax reports that are sent to State and Federal governments. The accumulated earnings column is a total of year-to-date earnings for the employee (before taxes). This number is used to help determine if an employee has reached a tax base.

The employee earnings record include the following information and calculations for each paycheck.

First, the gross pay is calculated, for hourly and for salaried employees.

Then, the federal, state, and local withholding taxes are calculated, based on the gross pay amount. The federal income tax amount is calculated as per the Law

The FICA tax deductions (social security and Medicare) are calculated, based on gross pay.Other voluntary deductions are included.All withholding and deductions are totaled.

Net pay is calculated, as gross pay minus total withholding and deductions.

The totals for all employees for the pay period, for federal, state, end FICA tax withholding, are entered into payable accounts

The payable account for FICA taxes is also added to by the employer’s contribution., which matches the employee’s withholding. The combined total of the employee withholding for income taxes and FICA taxes, plus the employer’s contribution to FICA taxes, is calculated and sent to the IRS.

The totals for FICA withholding are monitored, to be sure that the Social Security portion is stopped when the employee reaches the Social Security maximum for the year.

The gross pay is monitored to include an additional Medicare tax if the employee’s gross pay goes over a specific amount.