Income comes in different forms
- Regular: “Income that one is contracted to receive or has agreed to receive throughout the whole year as part of their remuneration
- Irregular: Income which come once in while, can be commission, leave sold, overtime and any such which are not regular.
General Rule: All income except that which has a legal exemption must be taxed.
When income is irregular it is taxed as of that period in which it is earned This principle is as according to accounting terms. “The accrual principle is the concept that you should record accounting transactions in the period in which they actually occur, rather than the period in which the cash flows related to them occur.”
(https://www.accountingtools.com/articles/2017/5/15/the-accrual-principle)
A simple example can be shown in the table below
| Month | Jan | Feb | March | April |
| Regular Income | $1,000 | $1,000 | $1,000 | $1,000 |
| Irregular Income | $0 | Overtime
$200 |
Leave Days Sold
$300 |
$0 |
| Total Taxable Income | $1,000 | $1,200 | $1,300 | $1,000 |
As shown above each income is taxed as it occurs. However sometimes the irregular income is missed and carried forward to the next period, it must still be taxed.
As a Payroll Administrator you must thus have your checklist to ensure that before you runt the payroll the irregular income has been captured.