Payroll taxes can be a liability on the balance sheet Payrol

Payroll taxes can be a liability on the balance sheet. Payroll taxes may also be found as an expense on the income statements. Why are these taxes sometimes a liability and sometimes an expense?

Solution

Payroll taxes = these are the taxes which employer withholds and/or pays on behalf of the employees on the basis of employees salary

Expenses on the income statement
Payroll taxes paid/provided for (due) by the employer on behalf of the employee and other payroll taxes due (which is a responsibility of the company to pay ) related to the relevant financial year will be shown as expesnes in the income statement.
Simply, Payroll taxes paid or due on the part of employer related to the relevant financial year, will be shown as expenses in the income statement.
Note: Relevant financial year is the year for which we are making the income statement and balance sheet.

Payroll taxes as liabilities on the balance sheet

The employer provided for the payroll taxes in the book when it become due, mainly at the time of salary payment . Further, it withholds a specific amount of payroll taxes from employees salary. Till then the amount withhold and provided for, is not paid to the tax depatment will be shown as liability on the balance sheet.

Simply, Payroll taxes due (provided for by the employer) and withhold from employees, but not paid to tax department till the balance sheet date, will be shown as liability on the balance sheet.