At the end of the month, employers transfer wages and salaries to their employees' accounts. At the same time, the employer is obliged to pay the wage tax, church tax and social security contributions for the employees. For many entrepreneurs the question arises at this point: How is the monthly salary payment booked? This article explains in 4 steps how payroll tax is posted and which posting records are associated with it.
A liability must be recorded in the amount of the net wages and salaries of all employees. This liability is to be posted against the wages and salaries account. In practice, payroll expense accounts are not posted per employee, but are divided by cost center (e.g., departments in the company). In our first example, let's assume that 1,000,000 euros net is paid to the company's employees.
Debit: Wages and salaries 1,000′
Credit: Payables from wages and salaries 1,000′
The second step is to post payroll and church tax liabilities. Employers are required by law to pay payroll and church taxes for their employees by the 10th of the following month. Therefore, the employer must also post the payroll and church taxes. Assume that the total social security contributions amount to 400,000 euros.
Debit: wages and salaries 400′
Credit: Wages and salaries payable 400′
The third step is to record the employer's and employee's social security contributions. Assume that the total amount of social contributions is 400,000 euros.
Debit: Statutory social expenses 400′
Credit: Social security liabilities 400′
The fourth and final step is to remit salaries to employees, payroll taxes to the tax office, and social security contributions to the social security agencies.
Credit: Social security liabilities 400′
By what date must the employer file the payroll tax return?
According to Section 41a (1) of the German Income Tax Act (EStG), the wage tax filing must be received by the tax office no later than the tenth day after the end of the wage tax filing period. The period for which the wage tax is to be declared and paid to the tax office depends on the amount of wage tax declared in the previous year. The payment date coincides with the registration date. The following applies: The wage tax registration must be transmitted by remote data transmission in accordance with the officially prescribed data record.
How long does the employer have to register social security contributions?
Pursuant to Section 23 (1) SGB IV, the total social insurance contribution in the anticipated amount of the contribution debt is due no later than the third to last banking day of the month in which the paid employment is performed. Any remaining contribution is due on the third last bank working day of the following month.
How are non-cash benefits recorded in the payroll account?
Monetary benefits are generally to be recorded in the payroll account. Section 4 of the Wage Tax Implementation Ordinance (LStDV) sets out the recording requirements in detail. For this purpose, separate wage types must be set up for the individual non-cash benefits with the corresponding tax effects (subject to wage tax at the employee, flat rate at 15%, flat rate at 25%). This ensures that they are recorded as a wage component and that wage tax, solidarity surcharge and church tax are correctly deducted via the wage tax registration. The posting is then made automatically via the payroll accounting posting document.
When selecting the financial accounting accounts, care must be taken to ensure the correct allocation in the profit and loss statement: Monetary benefits that are taxed individually for the employee can be posted directly to the "Wages" or "Salaries" account.
How to post late payment penalties for payroll tax correctly?
Ancillary tax payments that the tax office can claim, such as back taxes, late payment penalties or late payment penalties, share the fate of the underlying tax with regard to the deduction of operating expenses. They are either "appendages" (annexes) of the actually deductible business taxes and thus also business expenses and thus entitled to business expense deduction, or they are otherwise non-deductible expenses.
If the ancillary tax expense consists, for example, in the payment of late payment penalties for the untimely filing of payroll taxes, the following procedure shall be followed with respect to the late payment penalties: Either the account "Tax deductible late fees and penalty payments" 4396 (SKR 03) or the account "Tax deductible late fees and penalty payments" 4396 (SKR 03) is used.
The posting record for this is: Tax deductible/non-deductible late fees and penalty payments to bank/cashier.
What is the late payment surcharge for payroll tax?
When taxpayers pay due taxes late, the tax office levies a type of reminder fee, known as a late payment surcharge, to enforce the due tax payments. This also applies to business taxes paid late. Late payment penalties are incurred when an assessed or filed tax is paid late, i.e., when taxes are paid late. A late payment surcharge is not assessed by a separate notice. Rather, it arises by operation of law. The legal basis is found in § 240 AO (Tax Code). The late payment surcharge amounts to 1% for each month or part thereof by which the due date is exceeded.
Late payment surcharges on business taxes are deductible when determining the assessment basis for income tax. They therefore reduce the taxable profit. Late payment penalties for the advance VAT return are therefore deductible as business expenses in the same way as late payment penalties for the wage tax return. So if you ever forget to pay your taxes or file your income tax return, you now know how to apply a late payment surcharge on income tax.
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