How to Learn Payroll Accounting

Begin your study of payroll accounting by learning how to pay federal and state taxes.

The focus for students of payroll accountants is to understand how money and assets travel throughout a company. Like bookkeepers, payroll accountants must follow this path. These professionals record income and make sure the company stays ahead of its expenses. Because most of those expenses are regulated by federal and state governments, companies can face stiff penalties if they neglect to make these payments. That's why payroll accountants begin their study with careful analyses of how to comply with governmental mandates.

Instructions

1. Learn the definitions of the key payroll accounting terms "payroll," "fringe benefits," "income statements" and "balance sheets." Identify federal and state income, state and federal unemployment as key payroll taxes companies must pay. Understand why social security, Medicare and worker compensation insurance are considered payroll costs.

2. Know the elements of these employer-supplied benefits: vacations, holidays, insurance, sick time, retirement and profit-sharing plans. Find out which of these relates to corporate policy and which level of government, federal or state, controls them.

3. Study the concept of "matching principle." Find out how the principle compels organizations to record certain expenses in the same accounting period as related profits.

4. Know that blue-collar workers receive wages and white-collar workers receive salaries. Find out why most salaried employees receive gross salaries that do not vary much in a twelve-month period. Learn how to calculate gross wages.

5. Consider the difference between overtime pay, compensation for working more than 40 hours per week, and the overtime premium, the "half" portion paid for overtime work. For example, if a worker has completed 42 hours per week, he might be paid 40 hours at regular time and 2 hours at the overtime premium of "time and a half."

6. Study payroll withholdings, such as taxes and benefits employees must pay. Understand why federal and many state income tax systems mandate that companies withhold taxes from wages and salaries. Find out how these withholdings affect the employers. Find out penalties for employers who don't submit tax payments on time.

7. Learn elements of the Social Security tax. Find out how employers match the tax their employees pay. Learn percentages of the tax withhold at different income levels.

8. Learn how the Medicare tax is taken out of salaries and wages. Find out the percentage of wages and salaries employers must withhold in order to make their Medicare contributions.

9. Practice calculating an employer's portion of insurance, such as health, vision, life and dental. Learn how to calculate employer contributions to 401-K, profit-sharing and pension plans.

10. Find out how the federal and state governments calculate the unemployment tax rate. Find out how surpluses or deficits in a state's economy might affect those amounts.

11. Review the state's worker compensation insurance coverage. Find out why the insurance is mandatory in each state. Learn why rates for this kind of insurance vary according to the type of industry and number of claims an employer has filed. Learn how to make expense adjustments for a company that doesn't pay its worker compensation premiums on time.

References

• Degree Directory: Payroll Accounting
• Accounting Coach: Payroll Accounting

Resources

• Tenonline: Business Recordkeeping