Do You Have Employees?
Making the decision to hire employees should not be an overnight thought. The process of hiring an employee is not just about deciding the day to day responsibilities of that person it also includes understanding the additional expenses to account for and reporting requirements as an employer.
Wages expense is the hourly compensation cost incurred by a business for its hourly workers. This can be one of the largest expenses incurred by a business, especially in the services and production industries where there are many hourly employees.
The amount recognized as wages expense in an organization's income statement varies, depending on whether it uses the accrual basis or cash basis of accounting. Under the accrual basis, the amount of wages expense recognized is the amount earned by workers during the reporting period. Under the cash basis, the amount of wages expense recognized is the amount paid to workers during the reporting period.
Did you know? Salaries and wages paid to employees of your small business are tax-deductible expenses. However, other items also qualify under the salary and wage category with regard to employee wages. A partial list includes sick leave, vacation pay, bonuses, education expenses, and reimbursements for employee business expenses. These are also tax-deductible.A full list and explanation of each can be found in IRS Publication 334.
Source: AccountingCoach; BizFinance
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