Employers record two basic types of payroll entries: paying the employees (payroll entry) and paying the employer payroll taxes (employer payroll tax entry).
Example: Employees earn $100,000 for the month, and are paid on January 31. The employer withholds the following: Federal Income Taxes $15,000 State Income Taxes $ 5,000 FICA Taxes $ 7,650 After withholdings, the employees' net pay was $72,350. Debit Credit ------- -------- 1/31 Salary Expense 100,000 Federal Income Taxes Payable 15,000 State Income Taxes Payable 5,000 FICA Taxes Payable 7,650 Cash 72,350 Note: Examples of other potential withholdings include amounts for pensions, insurance, union dues, etc.
The employer's payroll taxes include matching the FICA and paying state and federal unemployment taxes.
Example: To continue with the preceding example, assume that state unemployment taxes are $1,500 and federal unemployment taxes are $500. The employer would record the following entry: Debit Credit ------- -------- 1/31 Payroll Tax Expense 9,650 FICA Taxes Payable 7,650 State Unemp. Taxes Payable 1,500 Federal Unemp. Taxes Payable 500 Note: The taxes will be remitted to various government agencies at a later date.