Employers’ responsibilities for payroll do not include
Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes along with the amount of these taxes withheld. Filing Form 941, the Employer’s Quarterly Federal Tax Return. Filing Form 940, the Annual Federal Unemployment Tax Return Maintaining individual earnings records for each employee. Recording the employee Federal Income Tax withholding as a debit to the Federal Income Tax Expense account
The Correct Answer and Explanation is :
The correct answer is: Recording the employee Federal Income Tax withholding as a debit to the Federal Income Tax Expense account.
Explanation:
Employers have several key responsibilities related to payroll, which are primarily focused on ensuring that employees are paid accurately, taxes are withheld and remitted correctly, and proper records are maintained. Let’s break down the options:
- Providing each employee with an annual report of his or her wages subject to FICA and federal income taxes, along with the amount of these taxes withheld:
- Employers are required to provide this annual report, typically in the form of Form W-2. This form summarizes an employee’s total earnings, FICA taxes (Social Security and Medicare), and federal income taxes withheld for the year. This is a legal requirement for employers under the IRS rules.
- Filing Form 941, the Employer’s Quarterly Federal Tax Return:
- Employers must file Form 941 every quarter to report the wages paid, the FICA taxes, and the federal income tax withheld. This is essential to ensure compliance with federal tax withholding and payment regulations.
- Filing Form 940, the Annual Federal Unemployment Tax Return:
- Employers are required to file Form 940 annually to report and pay federal unemployment taxes (FUTA). This form helps the IRS track and ensure employers contribute to the federal unemployment fund.
- Maintaining individual earnings records for each employee:
- Employers must keep accurate and detailed records of each employee’s earnings, hours worked, and the taxes withheld. These records are essential for tax reporting and auditing purposes.
- Recording the employee Federal Income Tax withholding as a debit to the Federal Income Tax Expense account:
- This is not an employer responsibility. The correct accounting treatment is to debit the “Employee Federal Income Tax Payable” or a similar liability account, not an expense account. The taxes withheld are considered a liability until the employer remits them to the IRS. The “Federal Income Tax Expense” account is typically used to record the employer’s portion of taxes, such as FICA, not the employee’s withholding.
Thus, the incorrect statement is the one about recording the federal income tax withholding as a debit to the Federal Income Tax Expense account.