The total calculation for your payroll, including total gross pay, total of each type of deduction, and total net pay, is set out in a payroll register. The calculation for each individual employee for total gross pay, withholdings and deductions, and total net pay is set out in an employee earnings record.
For each payroll you prepare, you have some specific liabilities that you must total and account for:
- Withholdings
Note the total amounts you withheld from all employee paychecks for federal, state, and local taxes. These amounts are payable to the individual taxing authorities.
- Social Security/Medicare Deductions
The total amount deducted from all employee paychecks for Social Security and Medicare must be set aside in a payables account. In addition, you must set aside an equivalent amount for your employer portion of these taxes. For example, if the total amount deducted from employee paychecks for Social Security/Medicare for one pay is $3,564, you must set aside an additional $3,564 in the "Payroll Taxes Payable" account.
- Other Deductions Payable
You must also account for other liabilities for additional federal and state taxes:
- Federal Unemployment Tax Payable
- State Unemployment Tax Payable
- State Worker's Compensation Tax Payable
- Federal Unemployment Tax Payable
- Other Voluntary Deductions
If you have deducted money from employee paychecks for such items as health insurance premiums, charitable donations, or qualified retirement plans, you must account for these totals and create payables for each, so you know how much to pay at the appropriate time.
