Payroll refers to the salaries, wages, bonuses, and deductions paid to employees for services provided during a period of time. It plays a major role for companies and is crucial from an accounting perspective as it affects net income. The primary mission of the payroll department is to ensure employees are paid accurately and on time with the correct tax withholdings and other deductions. Processing payroll involves gathering employee wage information, checking tax withholding status, calculating gross pay and tax liabilities, and deducting other required amounts before dispersing payment.

1. Payroll
In a company, payroll is the sum of all financial records of salaries for an
employees, wages, bonuses and deductions. In accounting, payroll refers
to the amount paid to employees for services they provided during a
certain period of time. Payroll plays a major role in a company for several
reasons.
For an accounting perspective, payroll is crucial because payroll and payroll
taxes considerably affect the net income of most companies and they are
subject to law and regulations.
The primary mission of payroll department is to ensure that all employees
re paid accurately and timely with the correct withholdings and deductions,
and to ensure the withholdings and decoctions are remitted in a timely
manner. This includes salary payments, tax, withholdings and deductions
from paychecks.

2. How to process payroll
1. Gather employees wage information-make sure it includes all wages,
tips and compensation in the pay period. If your system is computer
based, you will be able to run a report. If manual, collect all timesheets
and other related documents.
2. Check to ensure that you have W-4 information for each employee to
determine their martial status and withholdings. This will determine
their tax liability for federal income tax.
3. Calculate employee’s gross pay from employment agreement or
timesheet. Include tips, commission and overtime, if applicable.
1. Tax exempt deduction such as retirement or any saving plans are deducted prior to
calculating income tax, but other withholding taxes are according to gross.
2. If you are using a computer based system, gross pay will be automatically
calculated. If you are doing this manually, consider creating a payroll calculator
spreadsheet that allows you to simply put in employee hours and it will calculate for
you.
4. Determine withholding amount for federal income tax- Go to the IRS
publications 15(circular E). Choose either the percentage method or
the wage bracket method and use the appropriate chart.
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3. 5. Calculate employee amounts for social security taxes. The social
security tax rate 6.2%. Once an employee has reached a gross
cumulative pay of $106,800. no additional social security tax is
withheld. Automated systems will take no further tax automatically.
6. Calculate employee contributions for Medicare tax. This is currently
1.45%. All covered wages are subject to this tax. There is no salary
limit at which employee become exempt from contributing.
7. Determine state and local tax liabilities based on your locality.
8. Deduct additional employees items such as retirement and savings
plans, health insurance, charitable contributions or garnishments. Keep
in mind that some deductions are before tax. Some after tax.
9. Process payroll manually or through your selected system. Double
check amounts before dispersing.