Payroll Liabilities
Definition
Amounts owed as a result of running payroll but not yet paid out: net wages, income tax withheld, social-security and pension contributions, and any garnishments. They are liabilities held on behalf of employees and agencies, not business expenses in their own right.
Related Terms in Payroll
Payroll Journal Entry
The entry recording a pay run, debiting gross wages and employer contributions to expense and crediting net pay plus each withholding and contribution liability. Settling those liabilities later is a separate entry that clears them to zero.
FICA
The US Federal Insurance Contributions Act tax funding Social Security and Medicare, withheld from employee wages and matched by the employer. The Social Security portion applies only up to an annual wage base, and an additional Medicare amount applies above a set income level; both figures are published yearly by the IRS and SSA.
FUTA
The US Federal Unemployment Tax Act levy, paid by employers only and never withheld from employees, funding federal administration of unemployment benefits. It applies to a per-employee annual wage base, and employers paying state unemployment tax on time generally qualify for a substantial credit. Current rates and the wage base come from IRS Form 940 guidance.
SUTA
State Unemployment Tax Act contributions, paid by employers to the state funds that finance unemployment benefits. Each state sets its own wage base and assigns an experience-rated percentage reflecting the employers claims history, so the cost differs by state and by employer.
Stop memorising terms — let HelloBooks do the work
AI-assisted bookkeeping that handles invoicing, GST, reconciliations, and reports automatically. Free to start.