Payroll Taxes

Payroll Taxes should include social security, medicare, state unemployment and federal unemployment taxes. There are taxes that are paid by both the employee and employer, and there are some that are paid by only the employer. You can also break down between these two types on your bookkeeping so you know how much is the employer portion, and how much is the employee portion which comes out of their wages.

Salary and Wages

Wages paid generally means hourly or salary employees that you pay on a regular basis. Wages should be the gross amount paid before the deduction of any income or social security taxes. It does not include the amount of tax you pay as an employer, that is accounted for separately as payroll taxes. Wages should not include contract labor paid. It should include anyone who has worked for you during the year on a regular basis, even if they did not work all year or only for a short period.

Contract Labor Expenses

Contract Labor is a tricky category. Basically, anyone you pay over $600 during a year and is not a corporation is considered an outside contractor. This does not mean people who regularly work for you, more on this later. If you do real estate and pay someone to paint, fix the walls do landscaping, etc. they are contract labor. If you have a business that employs day labor, or other people who work for you on an occasional basis are contractors. This also means that you need to send them a 1099 tax form for the year, so you need to get all their information, including current address and social security to be able to send them the 1099 tax form.

Utilities

This category would include the basics electricity, gas and water. If you pay for garbage collection it is also under this category. Internet services can be considered part of your utilities, or you can categorize it as internet services. If you provide cable TV in your office for customers to watch while they are waiting, that would be considered part of your utilities expense. However, you cannot charge your personal cable bill as part of your utilities. Your utilities for your home should also not be expensed here, that is also a part of the home office calculation that is done on your personal tax return.

Rents

Rents would include office space you use for your business, or rent paid for a storage facility. Rent also includes equipment you may rent for a project, such as a tractor to clear land. Rental equipment should have a separate category from rent you are paying for office or storage space. You should not be expensing rent for your personal residence or apartment in this category, even if you work from home. That is a separate calculation done on your tax return under the home office category, but this should not appear on the books for your business.