US
Remittances to the Government
The
us has only one basic type of remittance:
employment taxes (a similar concept to payroll
taxes in Canada; see below). Currently, there is
no federal sales tax.
Employment taxes
In
the us, most employers are required to withhold
income taxes, social security tax, and Medicare taxes from their
employees' paychecks. They must also match the
employee contribution to social security and
Medicare taxes and remit both. Employers must also
calculate and remit federal unemployment tax (FUTA)
to the IRS.
To
track withholding taxes, your company should set up
the following accounts:
-
Wages (Le., the employee's gross
wages)
-
Employment taxes
(expense) (ie., the employer's share of payroll taxes)
-
Employment tax
liabilities (ie., withholdings from the employee's pay and the employer's share)
The
accounting entry for this will look like this:
DR Wages
DR Employment taxes
(expense)
CR Payroll
liabilities
CR Cash
The
treatment of federal unemployment tax is a little
different. It is calculated in most cases as 0.8
percent of the first $7,000 of an employee's wage.
The employer bears the burden of this tax; nothing
is withheld from the employees' pay.
When
it is time to remit this tax, you would set up the
entry as
DR Employment taxes
(expense)
CR Cash
Some
companies' bookkeeping systems automatically accrue
the amounts owing for FUTA, but it is not necessary to do so.
Other remittances to the government
There
are several other remittances that you might have to
make to various levels of government in the US,
including state taxes. The concepts for these are
the same as for the remittances.
US Remittances to the
Government