Research Paper Taxation Essay

net profit is the doctor count of requital for service rendered covering a fixed period of time, usually hours, or fixed nub of thrash. It is usually a compensation practicen to skilled and unskilled labor. Commission is usually a wage given to skilled and unskilled labor. Commission is usually a wage given to a salesperson based on the amount of his sales. This amount is usually added to basic wage.Bonus is given to simulate employees to sour more than efficiently and effectively (Valencia & Roxas, 2009) To baffle sure that employees comply with BIR regularisation and local judicature laws, companies must include all burning(prenominal)(p) employee and go with randomness in their fall insheet systems. Setting up and running the different components that equal a paysheet system requires due diligence and adequate cognition of assess legislation. Employees benefits In Philippine Accounting Standards (PAS) 19, paragraph 7 states that employees benefits argon all forms of consideration given by an entity in metamorphose of go rendered by employees.These benefits may be stipendiary directly to the employees or to their matterents, much(prenominal) as their children or spo offices. These can be settled by payment in hard currency in form goods and services. dissever 4 of PSAS 19 enumerates the following four classes (a) short term employee benefits (b) post-employment benefits (c) another(prenominal) term employee benefits and, (d) termination. Employee entropy During the new hire process, companies must collect information such(prenominal) as medical insurance and W-2 forms to determine what should be deducted from an employees paycheck.These forms also provide employers which crucial information, such as the employees kindly bail number and their keep back amount for government tax purposes. The systems must also track and process changes made to the employees tax freedom status, pensions, insurance computer programs or retirement funds. Salary information As go of the new hire process, paysheet systems include a component that designates which employees are full time, part time and contractors. Classifying prole in a paysheet system is important since the government levies high penalties on companies that categorize employees incorrectly. relevant taxes and deductions The National internal Revenue Code (R. A 8424) requires the employer to withhold specify of the salaries earned by employees that impart at least approximate an income tax due of the earner relative to the income earned. The monthly or semi-monthly withholding s taxable could be obtained from the BIR to serve as guide as to what amount to be withheld from the salary of the employee (http//www. ehow. com/list_6725482_components- paysheet-system. html, 17 July 2010). In preparing a paysheet, certain government man fittingd contri justions needed to be deducted from the gross play of apiece employee.These include withholding ta xes, PAG-IBIG, SSS (Social Security System) and PhilHealth contributions. Withholding taxes is remitted to BIR while PAG-IBIG is remitted to Home Development and correlative Fund (HDMF) (Cabrera, Ledesma & Lupisan, 2009). Other paysheet withholdings include employee contributions to benefits, retirement accounts, and charities, these are unconquerable by the employee during the fringe benefits selection process offered by their employer and must be taken into account as well as any employer matches when report paysheet .Methods of fabricateroll Computation A payroll system involves everything that has to do with the payment of employees and the filing of employment taxes. This includes keeping track of hours, calculating wages, withholding taxes and other deductions, thus appropriate methods must be applied in the computation to achieve a desirable output. More and more aspects of payroll are being handled electronically.Methods include direct paycheck deposit, debit cards, pa yroll and non-payroll, use Web-based information system to allow employees access, with a secure password, to their exclusive payroll records including pay stubs, an earnings record and in roughly cases, employer information, such as the play along manual or health insurance plan overview (Banning, 2008) Giove (1993) stated the seven methods for computing payroll Hourly Rate excogitate Employees paid on an periodical rate plan receive a fixed amount for for apiece one hour they work.An employees regular earnings are equal to the employees hourly rate multiplied by the number of hours worked during the payroll period. Salary Plan Salaried employees receive a fixed amount for each payroll period, whether weekly, biweekly, semimonthly, or monthly. If an employee on the salary plan works less than the regular hours during a payroll period, the employer may deduct for the time lost, although in most cases the employer does not make such a deduction. Regular earnings would be dete rmined by multiplying that hourly rate by the actual number of hours the employee worked during the payroll period.Overtime Pay All employees in all establishments and undertakings whether for profit or not are entitled to extra time pay for work rendered beyond eight (8) hours. just this does not apply to managerial employees, field personnel, and members of the family of the employer who are dependent on him for support, domestic helpers, person in the personal service of another, and workers who are paid by results. Employees in the government are also entitled to overtime pay but they are governed by Civil Service laws and rules. yet employees in the private sector are covered by the get the picture Code.Guaranteed Wage It is a written agreement to pay an employee a guaranteed token(prenominal) amount regardless of the hours worked, with an extra half-hour premium for hours over 40. temporary hookup Rate Plan It is a compensation plan whereby employee earnings depend on th e units produced. Commission Plan Sales commission plans vary greatly from company to company but are generally based on the sales made during payroll period. Combination Plan This is a compensation method whereby employees receive a fixed amount of salary for each payroll period incontrovertible an extra amount for production (piece-work) or sales (commission).Timekeeping Records Accurate timekeeping is an essential part of an efficient payroll system. every(prenominal) business must have an orderly method of recording the hours employees worked during the payroll period. The time records show the date and the time the workweek starts, the number of hours worked each day, and the total hours worked during the week. Time records are filed after the payroll is prepared and, in accordance with the requirements of the law, retained up to three years. The most common methods of timekeeping use a time clock with timecards or a time sheet. in that respect are two primary reasons to main tain accurate payroll records. First, is the compendium of the data necessary to compute the compensation for each employee for each payroll period. Second, provision of information needed to complete the various government report-federal and state- demand of all employees. All business enterprise both large and scummy are required by law to withhold certain amounts from employees pay for taxes, to make payment to government agencies by specific deadlines, and submit reports on official forms. (McQuaig & Bille, 2008). Other Aspects of paysheet Accounting SystemPayroll scan The payroll register summarizes employee earnings and deduction information in a journal entry that is inserted into the general ledger for invoice and general research purposes. Payroll registers are also utilize to create tax report. These documents are prepared by payroll staff or generated using payroll computer system. Payroll Services The meteoric success of payroll services is not accidental, but q uite a reflection of the business federations willingness to outsource the tedious and complex task of payroll report to outside specialists.The upside of outsourcing payroll is that payroll services ensure that the company complies with laws pertaining to payroll. That is a big deal considering the time investment it would take the payroll officer to stay current on payroll-related legislation. Another big plus is that payroll services are responsible for keeping track of each employees accumulated earning, tax withholding, and other information needed to exit W-2 forms at the end of the year.They also stay on top of things uniform direct deposits, salary adjustment, quarterly tax payments and all of the other inside information that can be distraction from the important job of leading the company (http//Gaebler. com/payroll-services, 8 Aug, 2010). In-house Payroll If contracting a payroll service does not sound like a good fit for a business, the attention also has the option of doing it in-house. But if the management plans on saving funds by personally administering the payroll, having more alternatives will be a discontinue idea. Even if the company only has a few employees, dealing with payroll-related expound can be a waste of time.Instead, designating the job to an employee who can give it the time it requires so precious time can be utilise to other things (http//Gaebler. com/in-house-payroll, 8 Aug, 2010). Whoever ends up doing payroll in the company will be happy to know that there is a lot of software program system out there to help them. In fact, most accounting software solutions have payroll modules. Start by assessing the capability of their current accounting software program. If it does not have a built-in payroll function, chances are it is available from the manufacturer as an add-on.If it is not, then the company needed to find whether to change accounting to one that does or attempt to find a payroll program that is compatibl e with the current system. Either way, it is charge the time to find a computerized system that meets the companys needs rather than trying to do it the old-fashioned way. Internal Control A territorys accounting and payroll functions are critical for the maintenance of a solid financial foundation. Accurate and timely financial reports are crucial to administration and board decision-making.Payroll must be accurate, as it represents the regularizes largest budgeted expenditure. Internal controls must safeguard the districts assets from misappropriation. Payroll processing is an error prone activity. If organizations have just one or two employees it may seem relatively easy to compute salaries outstanding, taxes etc, but as small business starts adding employees they find spending more and more time in computation of salaries including variable pay. Errors are common in the full and final settlement and increases when employees join in the middle of a term as the processes are m anual (http//ezinearticles. om/? expert=Mikael Anderson, 4 Aug, 2010).Waterhouse (2010) give tongue to in one of his studies that the objective of internal controls for payroll is to ensure that payroll disbursements are properly recorded and that related legal requirements (such as payroll tax deposits) are complied with. Segregation of duties is an effective internal control. The bank atonement clerk reconciles the bank accounts and is not involved in processing or approving items for payment. A payroll administrator, supervisor, specialist and six clerks perform the payroll function.The Human Resources Department (HRD) enters employee data into a database share by military unit and Payroll and sets the rate of pay. The software system controls the ability of individuals to change information based on their access to the system. This prevents unauthorized individuals from changing this information (http//window. state. tx. us, 6 Aug, 2010). Gelinas, Sutton and Hunton (2005) inc luded in their study some of the procedures that can be used to prevent or detect schemes. First is the direct deposit of payroll to eliminate alteration, forgery and theft of paper check.Second, is checking for duplicate names, addresses, and Social Security number in the employee data, finally is comparing actual to budgeted payroll. Expense Accounts are often an area of fraud and abuse. This include (a) using legitimate reenforcement from personal expense for the business expenses (b) overstating expenses by altering receipts (c) submitting simulated expenses by submitting copies of invoices. Such abuses can be minimized by formulating average policies that compensate employees for their out-of-pocket expenses.Copies of invoices should only be accepted in total circumstances. Finally, expense account activities should be monitored on a regular hindquarters to detect unusual patterns (Gelinas, Sutton & Hunton, 2005). Payroll Fraud Connection Payroll, similar to cash disbursem ents, is an area ripe with fraud potential. After all, large organizations will make thousands of payments to employees for payroll and expenses account reimbursement every payroll period. Firth (2006) expresses that Payroll Fraud is an important issue that needs to be addressed by both finance and Payroll professionals.Some of the key activities need to be considered include alter the quality of master file data, reviewing the end to end payroll process, and reviewing the pot that are performing each step in the payroll function. It is worth remembering that improving each of these areas will not only subvert the risk of payroll fraud, it will also result in many an(prenominal) other business improvements right across the organization. Here are some of the types of payroll frauds, along with the median loss for each to an employer (a) Ghost Employee, employees do not actually work for the company but receives paychecks.These can be recently departed employees or made-up persons (b) Falsified hours and salary, employees exaggerate the time that they work or are able to increase the salary in their employee date (c) Commission Schemes, employees falsify the sales on which commissions are based or increase the commission rate in their employee date and, (d) False workers compensation claims, employees fake injuries to collect disability payments (Gelinas, Sutton & Hunton 2005).