Employers record two basic types of payroll entries: paying the employees (payroll entry) and paying the employer payroll taxes (employer payroll tax entry).
A. Payroll 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.
B. Employer Payroll Tax EntryThe 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.