2. Gross and Net Pay
Gross: Total of an employee's regular remuneration
including allowances, overtime pay, commissions,
and bonuses, etc., before any deductions are made.
Net: The remaining amount of an employee's gross
pay after deductions, such as taxes and retirement
contributions, are made.
3. Payroll Register
The payroll register is an accounting document that
provides a summary of the payroll information for a
pay period.
It is important because it can help you file your
payroll information.
4. FICA
Determine if you are required to pay FICA tax. Any person who is in a standard
employee/employer relationship is required to pay tax on all taxable income.
Anyone completing work which is considered employment under FICA law or
receives funds as compensation for time spent are also required to pay FICA taxes.
Calculate your total taxable income for the pay period. This includes all earning as
part of an employee/employer relationship, such as tips, commissions, overtime,
piecework earnings and any taxable benefits. Deduct any heath and dental
premiums from this amount, as they are non-taxable.
Look up the current percentage taxation rate for OASDI and the Medicare or
Hospital Insurance Program. These rates are updated and maintained by the
Internal Revenue Service, complete with instructions on the method used to
calculate the amounts to be deducted from your pay.
Multiply the current percentage tax rate against the taxable earnings for the period
for both OASDI and Medicare or HI to calculate the amount of the deduction. The
rates and limits differ between the two programs, although they are combined in the
FICA tax amount.
Compare the amounts deducted from your payroll statement against your
calculation to ensure that the correct limits and percentages are used.
5. Federal and State Unemployment Tax
In stating to calculate payroll taxes, each of your
employee must complete an IRS form W-4. This form
will be used to calculate payroll taxes. In the W-4, you
can calculate the amount of the federal income tax, and
because most states have income tax structures that are
based on the federal taxation system, you may also use
this form to calculate the state tax to be deducted from
the salary of your employees. Also needed to calculate
payroll taxes are the percentage currently used for the
social security and Medicare. Both the employer and
employee split the amount needed to be paid. Whatever
is deducted from the employee to pay the social security
and Medicare taxes, the employer must match that
amount.
6. Payroll Tax Liability
A business' payroll tax liability consists of not only
the taxes required to be withheld from employees'
wages (Social Security tax, Medicare tax and federal
income tax) but also the employer's matching share
of Social Security and Medicare taxes
7. Taxes
The IRS publishes various tax return forms which
vary in their level of detail. The type of form you
should fill out depends on whether you have
dependents (e.g. children), what kinds of income you
have, and whether you quot;itemizequot; deductions. Most
taxpayers choose to fill out the least complicated tax
form that they are allowed to use.
