The importance of tax calculation in a payroll cycle
The way an individual in a modern setting spends and organizes their lives is hugely dependent on the needs and requirements they have in exchange of the hard work they invest their lives for. The earnings an individual works for in one payroll cycle is divided and further sub divided into categories so that the hard-earned money can go to the best of places where it is required. Before a certain sum of the income is encashed in the form of payment checks or bank transfers from an employer, a certain percentile is deducted from the total earnings towards funds which are to plan ahead of time the future for the employee.
The system wherein a certain pre-decided amount from a person’s salary is kept aside for, basically a rainy day. It is human tendency to spend off money when put into one’s pocket as is human psychology. So, the ideology behind creating direct debit from payroll for savings and also for tax deduction was introduced to negate the possibility for anyone employed by a company to miss out on paying mandatory sums of amount to the government which is for the greater good of the economy.
Under corporate social responsibility, it is considered to be the duty of the employer to keep in tab the financial practices of its employees. Setting aside funds for taxes and for retirement is one such slab. In earlier days, it used to be the case that the entire sum of amount earned by an individual would be credited in form of pay checks and then over a phase of time, the individual would have singular responsibility to pay off the taxes owed to the federal and state government through forms and public platforms. The con of such a procedure would be that payment would not always be as planned, and people would miss on making the payment or would delay it and incur penalties which will ultimately end up resulting in a heavy undertaking for the pocket.
The procedure which involves monthly or weekly deduction of a certain sum of money which is directly paid to the government from the employee is the safest and quickest way to make sure taxes are paid as per plan and on time.
