City Of Seattle City Council Approves The Payroll Expense Tax

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Payroll Expense

If you have any questions about the Seattle payroll expense tax and how it will affect your business, please contact any member of the Clark Nuber State and Local Tax group. Estimated business tax payments are due April 30th, July 31st and October 31st. Residential Landlords with less than $2,000,000 in gross receipts are exempt from estimated quarterly business tax payments and will not receive an estimated business tax payment notice. The difference between wages and salaries is often poorly understood.

Many companies pay their permanent employees for holidays such as New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving, and Christmas. It is not unusual for employees to be paid for 10 holidays per year. It is also common for employees to earn one week of vacation after one year of service.

Payroll Expense

Public counters are now open with limited appointments for tax and general business license services only. Those needing a regulatory license (e.g. adult entertainers and for-hire drivers) should make an appointment with the Consumer Protection Division. Eventually, you need to pay employer taxes and remit withheld taxes. After you get the information to record payroll entries in accounting, head on over to your books to get cracking. Increase the liability account because, as employees earn wages, you owe more.

The accrual method allows you to match payroll expenses with revenue and posts payroll expenses and liabilities in the same period. Use a payroll solution to process payroll and avoid manual calculations. Payroll can change frequently, so document your payroll process to save time. Every business should use the accrual method of accounting, which matches the revenue it earns with the expenses it incurs. The accrual method records payroll expenses in the month that you incur them, regardless of when you pay for the expenses.

Use Gross Pay And Deductions To Calculate Net Pay

Although Mayor Durkin decided not to sign the tax bill, it was passed by a veto-proof majority in the City Council and therefore became law. This in spite of the objections of many Seattle businesses and business groups. Charge to the project receiving the expense and why the transfer is necessary.

The amounts withheld are based on an employee’s earnings and designated withholding allowances. Withholding allowances are usually based on the number of exemptions an employee will claim on his/her income tax return, but may be adjusted based on the employee’s estimated income tax liability. The employee is required to complete a W‐4 form authorizing the number of withholdings before the employer can process payroll.

Payroll Expense

A payroll account will only have access to money for payroll purposes. The Withholding Tax is a 1% tax imposed on the wages of employees living or working in the City of St. Louis. Every employer who has employees working in the City of St. Louis, is required to withhold St. Louis City earnings tax on their gross earnings.

You can read about why we think this is the right choice for early-stage companies. DateAccountDebitCreditXX/XX/XXXXGross Wages1,000Employee FICA Tax Payable76.50Federal Income Tax Payable70State Income Tax Payable30Employee Health Insurance Payable25Payroll Payable798.50Keep in mind that your debits should equal your credits .

Use Gross Pay And Other Data To Calculate Net Pay

Any compensation you give to your employees should be included as a payroll expense, including bonuses, stock options, commissions, and other money spent on your employees. Processing payroll requires a company to complete several steps and calculate withholdings for employees.

  • Covered Expenses means expenses actually incurred by or on behalf of a Covered Person for treatment, services and supplies covered by the Policy.
  • Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities.
  • Capital Expenses expenses that are capital in nature or required under GAAP to be capitalized.
  • Save money without sacrificing features you need for your business.
  • Debit the wages, salaries, and company payroll taxes you paid.

All that originate in PPS must be moved using the former PETU process. The deadline to submit PETU and and U2C-PETU forms to transfer PPS payroll expenses was September 30, 2020. As an example, assume that a manufacturing company incurred a wage expense of $200,000 for the fiscal year 2020. Of the $200,000, 25% relate to wages for factory workers while the remaining relate to wages for workers at the head office. When the employees are paid, an entry is made to reduce the wages payable account balance and decrease cash. Payroll expense is the gross compensation paid in Seattle to employees.


Specifically, payroll expense for covered employees subject to federal social security taxes means the total wages and compensation as defined in Section 3121 of the Internal Revenue Code , without regard to Section 3121. Payroll expense for covered employees subject to the railroad retirement tax means the total wages and compensation as defined in Section 3231 of the IRC, without regard to Section 3231. The total payroll expense for employees in Seattle that have annual compensation of $158,282 or more, starting with the first dollar paid, must be included in the amount subject to the payroll expense tax.

Payroll Expense

Voters approved a shift from the payroll expense tax to one based on gross receipts. The change was intended to promote economic growth, greater revenue stability, and better equity in the business tax system. The new gross receipts tax system introduced a progressive rate structure, and a larger, progressive business registration fee.

Businesses Subject To Payroll Expense Tax

Link your accounts by re-verifying below, or by logging in with a social media account. Contract wages are based on the number of completed works under a contract – for example, a wage of $10,000 per house built under a development contract. Piece wages are based on the number of units produced – for example, Payroll Expense a piece wage of $5 per widget produced. This listing is not a complete listing of all account numbers. It identifies the most commonly used specific expense account values. It is the responsibility of the originator of the transaction to indicate the appropriate account number on all transactions.

Non-Exempt Staff -Union AccrualSalary expense for non-exempt union staff year end accrual. Non-Exempt Staff AccrualSalary expense for non-exempt staff year end accrual. Grad Assistants Non-Exempt AccrualSalary expense for non-exempt graduate assistants year end accrual. This tax is imposed in addition to any license fee or tax imposed by the City, State or other government agency. Filings without a signed authorization form may be rejected and returned. The signed authorization form should be submitted with the next manual filing and payment for each client.

What Is A Wage Expense?

In the weeks/months of the year 2021 , the employer debits Vacation Expense and credits Vacation Liability. In 2022, when the employee takes the vacation earned in the previous year, the employer records the gross amount of the vacation check with a debit to Vacation Liability . Unlike the Social Security tax, the Medicare tax has no cap . For example, if an employee earns a salary of $200,000, the employer must pay a Medicare tax of $2,900 ($200,000 x 1.45%) in addition to the $2,900 that was withheld from the employee. The combined amount to be remitted to the federal government for this one employee is $5,800. Wage and salary are often used interchangeably but they refer to different types of payments for employment. The worker is paid per hour for a set amount of hours per week.

  • Businesses with less in payroll expense do not need to file or pay this tax, but they are still responsible for filing and paying other general business taxes to which they are subject.
  • Grad Assistants Non-Exempt AccrualSalary expense for non-exempt graduate assistants year end accrual.
  • The employer’s share of Medicare taxes is recorded as an expense and as an additional current liability until the amounts are remitted.
  • Form P-10 is a quarterly tax return to remit payroll expense tax of 1/2 of 1% (.005) of gross compensation paid to employees.

To get a clear picture of your company’s finances and stay compliant, keep your payroll accounting up-to-date. This means their employees will receive ongoing monthly payments after they retire from the company. The matching principle requires that the cost of the benefit should be recognized during the years that the employees are working , and not when the employee is retired. To illustrate, assume that an employee works full-time for the entire year 2021 and as a result earns one week of vacation to be taken anytime during the year 2022.

The guidelines consider how much control you have over what the worker does, who provides tools and supplies, and if you have a written contract. If you have a lot of control over a worker, you should classify them as an employee.

Is This A Tax On The Employee?

To calculate gross wages, multiply the number of hours that each employee worked during the payroll period — up to 40 hours per week — by that employee’s hourly wage. Multiply hours worked in excess of 40 hours per week by one and a half times the hourly wage. The current employer’s FUTA tax rate is 6% on the first $7,000 in gross income a worker earns. If wages are subject to a state unemployment tax, the employer can use a 5.4% FUTA credit, which reduces the FUTA tax to 0.6%. Total federal and state unemployment taxes vary and depend on each state’s unemployment program. Calculate gross wages from an annual salary or hourly rate of pay and hours worked. The gross wages you pay employees may be your largest payroll expense.

Unemployment Tax Futa And Suta Withholdings

For purposes of the Gross Receipts Tax and Business Registration Fee, a lessor of residential real estate is treated as a separate person with respect to each individual building in which it leases residential real estate units. To file a Return on behalf of a combined group, you must have authorization to file on behalf of each taxpayer in the combined group. The form for this purpose is the Authorization To Be Included In Combined Filings – Form POA-2. If an entity was a member of your combined group for only a portion of 2021, include that entity in your combined group’s Return for the portion of 2021 that it was a member.

The preferred method of filing this tax is electronically, using FileLocal. The Seattle Payroll Expense Tax is a business excise tax applicable to all business that are engaging in business in Seattle. Because it’s a liability, decrease your Payroll Payable account with a debit. The concept is that in the years that the employee works, the company will charge Pension Expense and will credit either Pension Payable or Cash. For more specifics on pensions, you are referred to an Intermediate Accounting text or to the Financial Accounting Standards Board’s website

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