10.5 Payroll Records: The Payroll Register & Employees' Earnings Records
Key Takeaways
- The payroll register is a period record — one row per employee for a single pay period — and is the source document for the payroll journal entry and the pay run.
- The employee's earnings record is a person record — one row per pay period for a single employee — accumulated for the calendar year with quarterly and annual totals used for Forms 941, 940, and W-2.
- Separate taxable-earnings columns exist because Social Security stops at the $184,500 wage base for 2026 and FUTA stops at $7,000, while Medicare is uncapped.
- A payroll register must foot and crossfoot: total gross pay minus total deductions must equal total net pay before any payment is funded or any entry is posted.
- FLSA requires payroll records for 3 years and wage-computation records for 2 years; IRS Publication 15 requires employment tax records for 4 years after the tax is due or paid, whichever is later.
10.5 Payroll Records: The Payroll Register & Employees' Earnings Records
Quick Answer: Two statutory records carry the entire payroll cycle. The payroll register is a period record — one row per employee for a single pay period — and it is the source document for the payroll journal entry and the paycheck run. The employee's earnings record is a person record — one row per pay period for a single employee, accumulated for the whole calendar year — and it is the source for wage-base cutoffs, Form 941 quarterly totals, and the Form W-2. The Bookkeeping Certification exam lists "Payroll Computations, Records, and Payment" as a topic; the "Records" half is these two documents.
Everything you computed in Chapters 8 and 9 — gross pay, pre-tax deductions, FIT, FICA, garnishments, net pay — has to land somewhere auditable. A payroll that is arithmetically perfect but undocumented fails a Department of Labor wage-and-hour audit, an IRS employment tax exam, and a workers' compensation premium audit alike.
The Two Records at a Glance
| Payroll Register | Employee's Earnings Record | |
|---|---|---|
| Organizing axis | One pay period, all employees | One employee, all pay periods |
| A "row" is | One employee's pay for that period | One pay period for that employee |
| Time horizon | A single period | Calendar year, with quarterly subtotals |
| Primary use | Post the payroll journal entry; fund the pay run | Track wage bases; file 941/940; produce Form W-2 |
| Totals feed | The general ledger | Quarterly and annual tax returns |
The two records are the same data indexed two different ways. Turn the payroll register 90 degrees and distribute each employee's row into that employee's earnings record, and the books tie out. The sum of one period's postings into every employee earnings record must equal that period's payroll register totals. That reconciliation is the single fastest way to catch a payroll posting error.
Anatomy of the Payroll Register
+---------------------------------------------------------------------------------+
| PAYROLL REGISTER - COLUMN GROUPS (LEFT TO RIGHT) |
+---------------------------------------------------------------------------------+
| 1. IDENTIFICATION : Employee name / ID, W-4 filing status, dependents |
| 2. TIME : Regular hours, overtime hours |
| 3. EARNINGS : Regular, Overtime, Other (bonus/commission), GROSS PAY |
| 4. CUMULATIVE : YTD earnings BEFORE this period, YTD earnings AFTER |
| 5. TAXABLE EARNINGS: Social Security taxable, Medicare taxable, FUTA/SUTA |
| 6. DEDUCTIONS : FIT, Social Security, Medicare, SIT/local, |
| Section 125, 401(k), garnishments, other post-tax |
| 7. PAYMENT : NET PAY, check or direct-deposit reference number |
| 8. DISTRIBUTION : Expense account / department charged |
+---------------------------------------------------------------------------------+
Three column groups deserve attention because they are where exam questions live.
Cumulative earnings columns. You cannot compute Social Security tax, FUTA, or SUTA from this period's gross alone. You need the employee's year-to-date earnings before this period to know how much room remains under each wage base.
Taxable earnings columns. These are deliberately separate from gross pay because three different tax bases apply to three different amounts in the same row:
| Tax | 2026 wage base | What goes in the taxable column |
|---|---|---|
| Social Security (OASDI) | $184,500 | Gross less Section 125, capped at remaining wage-base room |
| Medicare | No cap | Gross less Section 125, always |
| FUTA | $7,000 | Gross less exempt items, capped at remaining room |
| SUTA | State-specific | Gross less exempt items, capped at that state's base |
The distribution columns. Charging wages to the right department or job is what makes the Profit and Loss statement useful and what supports job costing. In QuickBooks Online this is the class or location tag from Section 5.2.
Crossfooting: the built-in accuracy check
A payroll register must foot (columns add down) and crossfoot (the row logic adds across):
Prove it at the column-total level, not just row by row. If total gross minus total deductions does not equal total net pay, one column is mis-added or a deduction is in the wrong column — find it before you cut a single payment.
Worked Example: One Register Row Near the Wage Base
Marisol Ortega is paid semi-monthly. Before this period her YTD gross is $182,000. This period's gross is $5,000, including a $200 Section 125 health premium.
Step 1 — Section 125 reduces the FICA base.
Step 2 — Social Security taxable is capped by remaining wage-base room. Only $2,500 goes in the Social Security taxable column, even though $4,800 is FICA-eligible.
Step 3 — Medicare is uncapped. Her YTD wages have not yet crossed $200,000, so no Additional Medicare Tax applies this period.
Step 4 — FUTA and SUTA taxable are $0. She passed the $7,000 FUTA base early in the year, so the FUTA taxable column is $0.00 for this row. Same logic for SUTA once her state's base is exhausted.
Step 5 — Cumulative column after. Next period her Social Security taxable column will be $0.00 for the rest of the year.
The classic exam error is putting $4,800 in the Social Security taxable column because that is the FICA-eligible figure. The wage-base ceiling governs.
Anatomy of the Employee's Earnings Record
The employee's earnings record repeats the register's earnings, taxable-earnings, and deduction fields, but stacks them by pay period down the page for one person, with quarterly subtotals and an annual total.
+---------------------------------------------------------------------------------+
| EMPLOYEE'S EARNINGS RECORD - WHAT EACH TOTAL IS USED FOR |
+---------------------------------------------------------------------------------+
| Per-period rows -> Prove wage-base cutoffs and answer employee disputes |
| QUARTERLY SUBTOTALS -> Form 941 lines (wages, FIT, SS wages, Medicare wages) |
| ANNUAL TOTALS -> Form 940 (FUTA) and Form W-2 Boxes 1, 3, 5, and beyond |
| Personal data block -> Name, address, SSN, birth date, hire date, W-4, pay rate|
+---------------------------------------------------------------------------------+
This is why the earnings record — not the register — is the year-end document. Form W-2 Box 1 is the annual FIT-taxable total, Box 3 is the annual Social Security taxable total (which will stop at $184,500 for 2026), and Box 5 is the annual Medicare taxable total. Each traces to a column total on this record.
Retention: How Long You Keep Them
| Authority | Records | Retention |
|---|---|---|
| FLSA | Payroll records, collective bargaining agreements, sales and purchase records | 3 years |
| FLSA | Wage-computation records (time cards, work schedules, wage-rate tables) | 2 years |
| IRC / IRS Publication 15 | Employment tax records | 4 years after the tax becomes due or is paid, whichever is later |
Keep the register and the earnings records together with the returns they support. When an auditor asks how Box 3 on a Form W-2 was derived, the answer is a column total on the earnings record, backed by the register rows that produced it.
From Records to the Ledger
The payroll register is the source document for the entry you built in Section 10.4. Read the entry directly off the register's column totals:
| Register column total | Journal effect |
|---|---|
| Total gross pay | Debit Salaries and Wages Expense |
| Total FIT withheld | Credit Federal Income Tax Payable |
| Total Social Security + Medicare withheld | Credit FICA Taxes Payable |
| Total voluntary deductions | Credit the matching liability (insurance, 401(k), union dues) |
| Total garnishments | Credit Garnishments Payable |
| Total net pay | Credit Cash or Salaries Payable |
Because the register crossfoots, the entry balances automatically. If the journal entry does not balance, the register did not crossfoot — go back one step rather than plugging the difference.
Which statement correctly distinguishes the payroll register from the employee's earnings record?
An employee's year-to-date gross before this semi-monthly period is $182,000. This period's gross is $5,000, which includes a $200 Section 125 health insurance deduction. What amount belongs in the Social Security taxable earnings column of the 2026 payroll register?
Which record supplies the annual totals used to complete Form W-2 Boxes 1, 3, and 5?
A payroll register shows total gross pay of $84,000, total deductions of $23,500, and a total net pay column of $59,500. What should the bookkeeper conclude?
You've completed this section
Continue exploring other exams