Preparing Payroll Time Cards

In this Chapter…  We will learn how to prepare a payroll, payroll checks, and the records that must be maintained.

Child Labor Laws  Rules govern the types of jobs youth can hold and the hours of the day they can work……  A bar chart would be an appropriate chart style, with the hours on the vertical axis and the age groups on the horizontal axis.

Payroll  One of the largest expenses of a business.  Today we will focus on completing a payroll time card.

How do you track your hours?  What type of system?  What happens if you are a few minutes late?  How do you record overtime?  Do you have to record time away from your job when you take a break?

Terminology  SALARY- the money paid for employee services. (p. 340)  PAY PERIOD- the period covered by a salary payment. (p. 340)  PAYROLL- the total amount earned by all employees for a pay period. (p. 340)  TOTAL EARNINGS- the total pay due for a pay period before deductions. (p. 343)

FYI  Salaries are usually stated as a fixed amount on a weekly, biweekly, semimonthly, or monthly basis.  Salaried workers do not normally receive overtime pay.

Time Clocks

9 LESSON 12-1 ANALYZING A PAYROLL TIME CARD page 341

10 LESSON Add the Hours column. CALCULATING EMPLOYEE HOURS WORKED page Add Hours Reg and Hours OT columns and enter the totals. 2.Calculate the number of overtime hours and enter the amounts. 1.Calculate the number of regular hours for each day and enter the amounts.

11 LESSON 12-1 CALCULATING EMPLOYEE TOTAL EARNINGS page Enter the rate for regular time in the Rate column. 2.Calculate the regular earnings. Enter the amount. 3.Enter the rate for overtime. 4.Calculate the overtime earnings. Enter the amount. 5.Add the Amount column to calculate total earnings. Enter the amount of total earnings.

12LESSON 12-1 TERMS REVIEW  salary  pay period  payroll  total earnings page 344

To do list…  Aplia 12.1 Work Together and On Your Own EXIT TICKET

Exit Ticket  Briefly summarize the procedures for calculating regular, overtime, and total hours. PAYROLL!!!!

Determining Payroll Tax Withholding

Bell Ringer  OSADI- "Old Age, Survivor's, and Disability Insurance" and is also called FICA. In 2010 you get to pay a generous 6.2% of your pay and your employer also gets to match that amount! But hey, the good news is that this tax stops once your earnings it $106,800 for the year!

Bell Ringer  HI is the Medicare ("health insurance") portion of your Social Security tax. It is 1.45% of your gross pay, without limit.

 payroll taxes-taxes based on the payroll of a business. (p. 345)  withholding allowance-a deduction from total earnings for each person legally supported by a taxpayer, including the employee. (p. 346)

 social security tax-a federal tax paid for old-age, survivors, and disability insurance. (p. 349)  Medicare tax-a federal tax paid for hospital insurance. (p. 349)

tax base-the maximum amount of earnings on which a tax is calculated. (p. 349)

All Employers….  Are required to withhold employee payroll taxes from pay checks.  Payroll taxes are calculated as a percentage of employee’s gross pay.  In many areas employers are required to withhold state, city or county income taxes from employee earnings in addition to federal income taxes.

Amount taken out?  Determined by the employee’s marital status and number of dependants.  Let’s take a look at a W-4 form…this is the basis for the payroll entries related to federal income tax withholding.

23 LESSON 12-2 EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE page Write the employee’s name and address 2.Write the employee’s social security number. 3.Check the appropriate marital status block. 4.Write the total number of withholding allowances claimed. 5.The employee signs and dates the form.

Important!!! You must fill this form out correctly because the information will be used to calculate your federal income tax withholding for the entire year. Errors may result in you having to pay additional taxes at the end of the year.

FYI ALL EMPLOYEES MUST HAVE A SOCIAL SECURITY NUMBER YOU ARE RESPONSIBLE FOR LETTING YOUR EMPLOYEER KNOW IF YOUR NUMBER OF DEPENDANTS CHANGE.

26 LESSON 12-2 EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONS page Select the appropriate table. 2.Locate the employee’s total earnings. 3.Intersection of wages and number of allowances column.

Employee SS and Medicare Tax  Always subject to change  Total earnings X SS Tax rate = SS Deduction  Total earnings X Medicare Tax Rate = Medicare Tax Deduction.

28LESSON 12-2 TERMS REVIEW  payroll taxes  withholding allowance  social security tax  Medicare tax  tax base page 350

To do list 1. Apply Math Skills Handout 2. Aplia 12-2 Work Together, On Your Own & Application Problem 3. Audit your Understanding Page 350.

Preparing Payroll Records

Objectives 12-3 & 12-4  Complete a Payroll register and an employee earnings record.  Prepare a Payroll Check

Terminology 12-3  payroll register-a business form used to record payroll information. (p. 351)  net pay-the total earnings paid to an employee after payroll taxes and other deductions. (p. 352)  employee earnings record-a business form used to record details affecting payments made to an employee. (p. 353)

33 LESSON 12-3 PAYROLL REGISTER page Health insurance premium deductions 2. Payment date 3. Employee personal data 9. Other employee payroll deductions 4. Earnings 10. Total deductions 5. Federal income tax withheld 11. Net pay 6. Social security tax withheld 12. Total, prove, and rule 7. Medicare tax withheld 13. Check number 1. Pay period date

Employee Earnings Record  A business must sent quarterly reports to federal and state governments showing employee taxable earnings and taxes withheld from employee earnings.  The earning record is maintained for each employee.

35 LESSON 12-3 EMPLOYEE EARNINGS RECORDS page Total and prove 5.Earnings, deductions, net pay 2.Employee personal data 1 1.Last day of quarter 4.Pay period 3.Beginning accumulated earnings 6. Updated accumulated earnings

36LESSON 12-3 TERMS REVIEW  payroll register- a business form used to record payroll information. (p. 351)  net pay- the total earnings paid to an employee after payroll taxes and other deductions. (p. 352)  employee earnings record- a business form used to record details affecting payments made to an employee. (p. 353) page 355

Preparing Payroll Checks

38LESSON 12-4 PAYROLL BANK ACCOUNT 1.Prepare the check stub. page Prepare the check. 12

39 LESSON 12-4 EMPLOYEE’S PAYROLL CHECK page Prepare the check stub of each employee’s payroll check. 2.Prepare each employee’s payroll check. 21

To do list for  Aplia 12-3 & 12-4 Work Together and On Your Own + Application problem Study Guide Chapter 12 Xtra! Study Tools (c21accounting.com) Tutorial Quiz (c21accounting.com) Explore Accounting Page 359 (10 Points)

Recording A Payroll

Previously…  We prepared a payroll register….  Today we will use the information from the payroll register to record the payment of the payroll and to record and pay payroll taxes / reports.  Calculate Payroll Taxes

43 LESSON 13-1 PAYROLL REGISTER page 369 The payroll register column totals are the source of information needed to prepare a journal entry for the payroll.

44 LESSON 13-1 PAYROLL REGISTER page 369 Total earnings should always equal the total deductions PLUS Net Pay.

ANALYZING PAYMENT OF A PAYROLL  The total earnings column of the payroll register is the debit amount for Salary Expense. This is the amount of money the employees actually earned before deductions are subtracted.

ANALYZING PAYMENT OF A PAYROLL  The Net pay column is the credit amount for Cash. This is the amount of cash that was actually paid to the employees.

ANALYZING PAYMENT OF A PAYROLL  All other columns provide the other credit parts of the entry.  These credits become liabilities, so add “Payable” to the end of each column heading and you have your liability account.

48 LESSON 13-1 ANALYZING PAYMENT OF A PAYROLL page 370

49 LESSON Write the titles of accounts credited. JOURNALIZING PAYMENT OF A PAYROLL page 371 December 15. Paid cash for payroll, $4, Check No Write the date. 2.Write the title of the account debited. 3.Write the check number. 4.Write the account debited. 7.Write the amounts credited. 5.Write the total amount paid to employees.

50 LESSON 13-2 UNEMPLOYMENT TAXABLE EARNINGS 2 3 page Enter accumulated earnings and total earnings for each employee. 2.Enter unemployment taxable earnings. 3.Total the Unemployment Taxable Earnings column.

51 LESSON 13-2 Federal Unemployment Tax = Federal Unemployment Tax Rate × Unemployment Taxable Earnings State Unemployment Tax = State Unemployment Tax Rate × Unemployment Taxable Earnings UNEMPLOYMENT TAXES page 375 $6.32=0.8%×$ $42.66=5.4%×$790.00

52 LESSON 13-2 JOURNALIZING EMPLOYER PAYROLL TAXES page 376 (continued on next slide) December 15. Recorded employer payroll taxes expense, $485.92, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $354.11; Medicare tax, $82.83; federal unemployment tax, $6.32; state employment tax, $ Memorandum No. 63.

53 LESSON 13-2 JOURNALIZING EMPLOYER PAYROLL TAXES page Write the debit amount.1. Write the date. 5. Write the titles of the liability accounts credited. 2. Write the title of the expense account debited. 6. Write the credit amounts.3. Write the memorandum number. (continued from previous slide)

To Do List for  Make sure you have completed Accounting in the Real Word (page 367) Internet Activity (page 367) Aplia 13-1 (Work Together & One Your Own, Application Problem) Aplia 13-2 (Work Together & One Your Own, Application Problem)

Reporting Withholding And Payroll Taxes

Today’s Objective  Prepare selected payroll tax reports

Question for you…  Who has received a W-2 form (Wage and Tax Statement)?  This is a statement employers must prepare for each employee. It reports to the federal government the amount of earnings paid to each employee during the year.

W-2 Form  This is only one of several forms a business must prepare.  We will look at three forms today.

W-2  Must be made for each employee  The W-2 reports total earnings and the taxes that have been withheld from the employee’s pay for the year  The information on the W-2 is sent to the IRS with copies sent to the employee  A copy of the W-2 must be attached to an individual’s income tax return

60 LESSON 13-3 EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD page 378

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN  The purpose of this form is to show the federal gov’t the total earnings of ALL employees of the business.  In addition, it reports the total income tax withheld, and total social security and Medicare tax (both employees’ and employer’s tax) owed to the federal gov’t for the quarter being reported.

62 LESSON 13-3 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued on next slide) Heading 2.Number of employees

63 LESSON 13-3 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued on next slide) 3.Total quarterly earnings 4.Income tax withheld 5.Employee and employer social security and Medicare taxes 7.Total taxes 6.Social security plus Medicare taxes

64 LESSON 13-3 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued from previous slide) Total taxes for each month9. Total taxes

W-3 (Employer Annual Reporting of Payroll Taxes)  Sent to the Social Security Administration each year with a copy of the W-2  Reports total earnings of all employees for the year plus total federal income tax, social security tax and Medicare Tax withheld.  Serves as a summary to the IRS

66 LESSON 13-3 EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES page 381

To do List  Aplia Work Together & On Your Own + Application Problem  Aplia Study Guide Chapter 13  Payroll Handout-Memo

Paying Withholding and Payroll Taxes

Today’s Objectives  Finish Chapter 13.4 Paying Withholding And Payroll Taxes  Work in Aplia  Open Book Test – Chapter 13

Important!!!  It is important to pay withholding and payroll taxes accurately and on time.  Some of the consequences of not paying on time are: Additional Interest and penalties assessed Legal action in extreme cases

Frequency and Method of Payment  This all depends on the total amount of tax paid per year.  The government provides a flow chart on how to “deposit” employment taxes

72 LESSON 13-4 PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 383

What to take from this…  A monthly depositor is one who paid $50K or less in the pervious four quarters.  A monthly depositor must pay by the 15 th day of the following month.  Businesses with large amounts of payroll taxes must pay the amounts every few days.  Businesses with lesser amounts pay once a month.

74 LESSON 13-4 FORM 8109, FEDERAL DEPOSIT COUPON page 384 This coupon accompanies the payment. 941 (Type of Tax)-Federal Income, SS and Medicare

JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX  Paying the liabilities for employee federal income tax, social security tax and Medicare taxes reduces the liability accounts and the cash account  The liability accounts are debited and Cash is credited.

76 LESSON 13-4 JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX Write the date. 2.Write the titles of the three accounts debited. 3.Write the check number. 4.Write the debit amounts. 5.Write the amount of the credit. January 15. Paid cash for liability for employee income tax, $757.00; social security tax, $1,451.38; and Medicare tax, $339.42; total, $2, Check No. 347.

77 LESSON 13-4 PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 386 Unemployment tax (940)

78 LESSON 13-4 JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page Write the date. 5. Write the amount of the credit to Cash. 4. Write the debit amount. 3. Write the check number. 2. Write the title of the account debited. January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $ Check No. 367.

79 LESSON 13-4 JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX page Date 5. Credit amount 4. Debit amount 3. Check number 2. Account debited January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $ Check No. 368.

80LESSON 13-4 To Do List  Aplia 13-4 Work Together & On Your Own Application Problem Chapter 13 Test (Open Book) page 389