Payroll taxes
Set up payroll tax types with thresholds and bands, add your country's usual contributions, and file and pay payroll tax for each period.
What it is
Payroll taxes are the amounts a pay run withholds from employees, such as income tax or social security, and the taxes the business pays on top as the employer. You keep them as payroll tax types. Each pay setup picks its tax lines from that list.
Payroll tax filings record what is owed for each pay period, when it is due, and when it was filed and paid. Paying a filing posts the remittance to the books.
Who it is for
- Owners and payroll clerks who withhold tax from salaries
- Accountants who file and pay payroll tax each month or quarter
- Businesses that need their country's usual social security, pension or health contributions without typing every rate
Before you start#
- Switch payroll on in Settings › General (Payroll = Yes).
- Each screen has its own rights: view, add, edit and delete on Payroll tax types and on Payroll tax filings.
- Rates change every year. Check every rate and rule with your payroll adviser before the first pay run.
Step by step#
- Open Taxes › Payroll tax types and choose Country contributions to see the usual contributions for your country. Choose Add the missing ones to add them as tax types.
- Choose New tax type for any other tax. Give it a name, say Who pays it (withheld from the employee, or paid by the employer), how it is Worked out as (a percentage or a flat amount), the default rate and the jurisdiction (federal, a state, a city and so on).
- If the tax has a yearly threshold or bands, open Thresholds, ceiling & bands (a year) and fill them in.
- Open Payroll › Pay setups and add the tax lines to each employee's setup. Use the amount
autoto have the rules work the tax out. - After the pay runs of a period are paid, open Taxes › Payroll tax filings and choose New filing. Pick the pay period and the due date. The amount is suggested from the paid pay runs in that period.
- When you have filed it with the tax office, mark it Filed. When the money goes, mark it Paid and choose the cash or bank account it was paid from.
Tax types#
Each tax type has a name, who pays it, a percentage or flat amount, a default rate, a jurisdiction and an active switch. Only active types can be picked by pay setups. A tax type that pay setups use cannot be deleted. Rates are checked when saved: no negative rate and no percentage over 100.
Country contributions
Country contributions offers ready payroll tax types for many countries, for example the United States, the United Kingdom, Germany, India, Canada, Australia, Saudi Arabia, the United Arab Emirates, Bangladesh, Kenya, Nigeria, South Africa, Brazil, Mexico and France. They cover social security, pension, health, unemployment and training levies, each as a percentage of gross pay. The list shows the date its figures are from. They are added only when missing (matched by name), and from then on they are yours to change.
Thresholds, ceilings and bands
A tax type can carry a yearly rule, so an auto line is worked out the way the country does it rather than as a flat percentage:
- Exempt threshold / allowance: the part of yearly pay that is not taxed.
- Ceiling (wage cap): pay above this is not taxed.
- Bands: each band taxes "up to" an amount above the threshold at its own rate; the last band is open.
- Nil when the taxable amount is up to: no tax at or below this amount.
- Cess / surcharge on the tax (%): added on top of the tax.
The yearly tax is worked out from the period's gross pay times the number of periods in a year, then spread evenly across the periods.
Tax management#
Payroll › Tax management shows, for each active pay setup, the gross pay, tax withheld, employer tax, insurance, retirement, other deductions and net pay. For each payroll tax type it also shows the year's withheld and employer amounts from paid pay runs.
Filings#
A filing has a label, the pay period, the due date and the amount. Its status moves from To file to Filed to Paid. The filters on the list show each group. A period cannot end before it starts.
How it posts to the books#
- The pay run itself withholds the tax: Cr Employee Tax Payable (see payroll). Employer tax is Dr the employer payroll tax expense, Cr Employee Tax Payable.
- Marking a filing Paid posts the remittance: Dr Employee Tax Payable, Cr the cash or bank account it was paid from (else Undeposited Funds). It is dated by the business's own date.
- Un-paying a filing, or changing a paid amount, reverses the entry or posts it again. Deleting a paid filing takes its entry with it.
Limits and what is not there yet#
- The yearly rules are spread evenly over the year. There is no year-to-date catch-up when pay changes mid-year; your adviser re-balances that.
- Allowance tapers, marginal relief, tax codes, filing status and per-employee reliefs are not modelled.
- Ready income tax bands exist for the United Kingdom and India. For other countries, enter the bands yourself.
- Filings are not sent to a government portal; file with the tax office yourself and record it here.
Questions#
Where do the suggested filing amounts come from?
From the pay runs paid in the filing's period: the tax withheld from employees plus the employer tax.
Can I change a country contribution rate?
Yes. Once added, a contribution is an ordinary tax type that you own. Edit its rate or rules at any time.
What does "auto" mean on a tax line?
The line's amount is worked out from the tax type's threshold, ceiling, bands and cess instead of a fixed amount or percentage.
Why can't I delete a tax type?
A pay setup still uses it. Remove it from those setups first, or switch it off so it can no longer be picked.