025 Taxes - Payroll

Expenses

Personnel

Synopsis

Account 025, Taxes – Payroll is established to record the monthly provision of the dealership’s obligation for employee taxes such as the employer’s share of the F.I.C.A. tax and/or unemployment taxes.

Debits

Credits

Monthly provision for employer’s share of payroll taxes which include:

a. F.I.C.A.

b. Federal Unemployment

c. State Unemployment

d. Local municipal taxes, if applicable

Example 1

Record the $122 of employer’s payroll taxes incurred on a mechanical shop technician’s compensation of $1,600. The $544 of payroll taxes payable includes $422 withheld from the technician’s pay.

Journal: Payroll

Entry:		Debit	Credit
Account 247A	Inventory – Work in Process – Mechanical	$800
Account 024-05	Absentee Compensation – Mechanical	$800
Account 025-05	Taxes – Payroll – Mechanical Department	$122
Account 202	Cash in Bank		$1,178
Account 323	Payroll Taxes Payable		$544

Distribution of Expenses

	Departmental Distribution
025 Taxes-Payroll	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
F.I.C.A.	Employees	Employees	Employees	Employees	Employees	Employees	Employees
State and federal unemployment taxes	Employees	Employees	Employees	Employees	Employees	Employees	Employees

Comments

Only the employer’s share of Payroll Tax is posted to this account. Since most tax remittances are due on a quarterly basis, a monthly provision should be established and debited to this account. The offsetting credit is posted to Account 323, Payroll Taxes Payable (Accrued Liabilities).

Note:

Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.

Departmental Distribution