Similar to the bookkeeping cycle, the payroll cycle has many frequent activities, fewer incremental requirements and one important end of the year report. This lesson explains these respective cycles and how they tie together for the final year end report.
Year End Payroll Reports
Year end payroll reports include Forms W-2, W-3, 940, 1099, and 1096. All of these are year-end reports filed by the company to the Internal Revenue Service and the Social Security Administration for the purpose of identifying those individuals or small businesses that received some form of compensation throughout the calendar year.
Accrued payroll is a current liability comprised of four sections. The first is the amount of payroll earned by staff and not yet processed or paid. The second is the dollar value of personal time off accumulated for each employee aggregated into one number. The third consists of payroll taxes owed to the respective governmental authorities and the final section comprises the accumulated benefits payable such as health insurance, retirement contributions, and amounts owed to third parties as deductions from the gross payroll.
Federal Unemployment Tax Act or FUTA for short is a part of the Internal Revenue Code and is an employer tax on wages paid to employees. It is used to fund unemployment benefits. The tax is paid on the first $7,000 of wages paid to every employee. It is reported via Form 940 https://businessecon.org/resources/. The Form must be filed and all taxes paid by January 31, 2021.