What Is Payroll Accounting?

Payroll accounting is a large function of most businesses and contains very confidential information, such as personal employee information and pay rates. Most companies have dedicated accountants to handle the payroll accounting process.

Payroll Taxes

The most important function of payroll accountants is to process the payroll taxes for the federal and state taxes. Each employee's W-4 is reviewed and entered into the payroll system accordingly. Most payroll systems automatically calculate the tax percentages.

Additional Withholding

Some individuals require additional withholding amounts from their paychecks. Items such as garnishments, child support and student loan repayments can all be withheld legally from an employee paycheck.

Company Benefits

Each company offers certain employee benefits such as medical, dental, vision or life insurance that must be properly deducted from employee paychecks. These items are handled by the payroll accountant, who deducts them from the paychecks and moves the money into the company benefits plans.

Direct Deposit

Most large companies use direct deposit for paying employees. Payroll accountants must verify the information in the payroll file before it is sent to individual banks. After submission, an exception report is run and any paychecks not deposited must be paid to the employee by paper check or re-submission.

Payroll Clearing Account

Companies that do no have direct deposit utilize a payroll clearing account. This is a special bank account that holds only money relating to paychecks. An accountant must reconcile the bank account after payroll checks are issued to ensure that no discrepancies have occurred with employee paychecks.

References

• Payroll Accounting Process