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.