Income taxes are tax liabilities based on income, and these taxes are assessed at the federal, state, and local level. Payroll taxes include income tax withholdings and a number of other taxes that are assessed on employers and workers. If you understand the relationship between income taxes and payroll taxes, managing payroll is much easier.
Processing payroll requires you to post accounting entries using accrual accounting. To complete payroll, you must calculate withholdings and submit withholdings to third parties. You have to complete tax forms, report wages to workers, and post journal entries.
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