Education

Are you confused about FICA, FUTA, SUTA, Social Security, Medicare and other withholdings? Read this to get the answer to the question, “What are payroll taxes?”

Payroll taxes are the statutory funds an employer is required by law to withhold based on the current wages, tips, salary or other compensation of an employee. In the United States, the federal and state governments both require the collection of payroll taxes. The taxes withheld provide for social security, Medicare and other funds such as unemployment.

FICA

In the United States, Medicare and social security reside under the category of taxes contained in the Federal Insurance Contributions Act, commonly known as FICA. As a joint tax, both the employee and the employer share in the payment of FICA taxes. Employers deduct the employee’s portion from the worker’s compensation to be paid and pay the other portion accordingly.

Some taxes within FICA have a wage base. The wage base is the dollar amount that must be reached during the year before the employer and/or the employee can stop paying taxes. As contributions and compensation progress at the appropriate rate when the wage base is reached neither party is required to contribute towards the tax. Taxes that have no wage base require continual contributions throughout the year and during the full course of employment by both parties.

FUTA and SUTA

Federal unemployment tax and state unemployment tax, FUTA and SUTA respectively are contributions to funds that employers are required to make according to federal and state law. Though similar in nature FUTA and SUTA have different requirements and regulations. However, both of these taxes are essentially payments that fund the unemployment system and serve as a reserve pools of income for qualified workers who lose their employment.

PAYG and PAYE

Pay-as-you-go and pay-as-you-earn are also withholding taxes that are equivalents to payroll taxes. Australia and the United Kingdom operate their withholdings using these systems. Under the PAYG system an employee receives a summary statement from their employer detailing all compensation and amounts withheld during the financial year. This information is then used for processing a tax return.

The PAYE system considers withholdings as advanced payments of tax liability. If the withheld amount exceeds this figure a refund is granted based on the proper filing of a tax return. Similar to the payroll system in the US, PAYE withholdings apply towards medical care and retirement funds.

For further detail regarding payroll taxes please consult an authority in your jurisdiction on the subject, such as the IRS in the United States or a proficient tax attorney or accountant in your locale. This payroll tax guide merely serves as an overview and may not meet your specific needs. However it should assist you in understanding the basics of what goes into a payroll check and also answers the question, “What are payroll taxes?”

A good payroll book can prevent you from committing total disaster while simultaneously guiding you towards success. Taxes, deductions, deposits, legal compliance and more can be overwhelming. A payroll book can be a valuable resource.

Books on processing payroll that last the test of time generally are rare. This is not because the quality of information is not there, but more because the information and laws regarding taxes, compliance and the other components required to properly handle your payroll are constantly updating and changing. However, there are a few books that you can purchase to help you familiarize yourself with the payroll process and point you in the right direction should you decide to conduct in-house payroll.

Payroll Best Practices

Written with controllers and payroll managers in mind, this book covers in detail various methods for payroll improvement. Styled as a how-to manual, Payroll Best Practices showcases a wide range of options that you can choose from to improve your current payroll system. Highlights include: timekeeping automation and simplification, reducing workload and payroll error rates of staff, outsourcing payroll functions, policy implementation, a glossary of payroll terms and an appendix that summarizes the 100+ best practices contained within.

Payroll Accounting

Primarily used as a school book, Payroll Accounting and its annual revisions (Payroll Accounting 2011, Payroll Accounting 2012, Payroll Accounting 2013, etc.) gives you a detailed look at calculating payroll, completing the required taxes, records and necessary reports. Each revision of Payroll Accounting covers the latest laws and updates regarding the payroll process. Packed with coursework, the text drives forward the idea that application is better than theory by providing useful working examples from real businesses to showcase successful implementation of the information presented. Additionally, with Payroll Accounting there is bundled software with an example payroll project that you can use to practice the payroll methods learned from the text.

Payroll: A Guide to Running an Efficient Department

This book is presented as a resource for businesses to effectively engage in up-to-date payroll practices that are compliant and in accord with governmental regulations. As a payroll guide the emphasis leans towards the efficiency of the payroll department as the title implies. With that in mind, the intricate details of procedure policies, payroll measurements and the like are not found in this book. Overall however, Payroll provides pertinent information when it comes to tax compliance and what it takes to implement new methods to get your payroll department functioning smoothly. Inside you will find details covering: fraud, payroll reconciliation, tax deposits, payroll systems, benefits, pay cards, direct deposit, and employee self service systems along with much more.

Conclusion

Each of these books contains information pertinent to successfully operating a compliant payroll. However, there are other books on the subject that may better serve you based on your current skills and knowledge on the topic. The books mentioned here merely serve as a launch pad for you to either get started with payroll or to further your knowledge on the topic. Be sure that with any book on payroll, accounting and/or finance to get the most current version you possibly can if you are going to depend on it as the foundation for conducting business as the laws and regulations on the subject update continually.

Do you want to learn more, get a raise or just perform better? There are numerous options available for you to get training in payroll processing. Here is a quick look at the various options available for you improve your knowledge on the subject.

Training courses and certification provide a level of knowledge and a consistent framework from which individuals and companies both can draw on to properly address, process and conduct payrolls. Through payroll training seminars or by becoming certified you gain insight and learn practices that are considered the norm.

While there are no official government agencies (in the US) regarding payroll, there are certificate programs and college courses widely accepted as displaying competency within the payroll profession.

College Classes

Colleges that provide training for payroll processing generally focus on accounting and contain payroll as a portion of the coursework. That is not to say that the payroll portion of the instruction will be deficient, just that it would not be the focus of the course. However, there are some colleges that offer payroll processing as full courses and cover in great detail the intricacies involved in payroll processing.

Certificate Programs

Like the specialized college courses there are certificate programs that focus on payroll processing. However, in addition to providing you with in-depth knowledge regarding payroll processing, garnishments, taxes, compliance, regulations and more, payroll processing certificate  programs provide you with credentials that attest to your proficiency that can be used for career advancement, job placement or as leverage to garner a higher salary.

Self-Directed Training

Also there is self-paced or self-directed training in which you either complete your coursework in a manual or follow a series of webinars, videos or other instructional guides at your own pace without the aid of an instructor. For employers, employees and others with time constraints gaining a better understanding of how to process payroll through this means is advantageous, because it allows them to maintain their current daily responsibilities without the interruption of a mandatory schedule, such as what is generally required with college courses and certificate programs.

Each one of the options presented regarding payroll training has strengths and benefits as well as what could be considered weaknesses and disadvantages. When looking to further your knowledge of payroll processing be sure to choose the option that best fits your needs and will provide you the most reward.