LESSON 12-2 Determining Payroll Tax Withholding 10/24/2019 LESSON 12-2 Determining Payroll Tax Withholding

Today’s Learning Objectives By the end of class today you will be able to: Complete a W-4 Calculate an employee's payroll tax withholding LESSON 12-2

Pay Stub Deductions What are typical payroll deductions found on a pay stub? Which deductions are taxes? Which deductions are not taxes?

What is a W-4? A W-4 form alerts the employer as to how much federal tax to withhold from each employee’s paycheck. Your employer will provide you with the form once you are hired LESSON 12-2

Who has to Complete a W-4? A W-4 must be completed by every new employee Once hired, a W-4 does not need to be resubmitted or updated unless there’s a change to: Marital status Number of allowances Exemption of earnings LESSON 12-2

W-4 Allowances & Dependents An allowance is an exemption that determines how much tax to withhold from an employee’s paycheck The more allowances, less tax is withheld The fewer allowances, more tax is withheld Most full-time students younger than the age of 19 and the age of 24 are able to be claimed by a parent/guardian on their income taxes. LESSON 12-2

EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE W-4 page 346 3 Knowing how to fill out a W-4 is a lifelong skill 3 2 1 4 5 1. 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. LESSON 12-2

Are you Exempt? To be exempt from having federal taxes withheld from your paycheck, you must meet several criteria: You had the right to a full refund last year and had no tax liability You anticipate on having a full refund this year You’re able to be claimed as a dependent You will not earn more than $6,300 for the year LESSON 12-2

How to Determine if you are EXEMPT LESSON 12-2

Exempt or Non-exempt? Sarah is 17 years old, and was just hired for her first job. She is a senior in high school. She plans to work about 15 hours each week after school earning about $121 per week. Can Sarah claim exemption on her W-4? Yes. Sarah will be making under $6,300 for the year and is able to be claimed as a dependent. She also had no tax liability last year. LESSON 12-2

Completing a W-4 for Sarah 1 1 LESSON 12-2

Completing a W-4 for Sarah Sarah H. Smith 123-45-6789 x 555 Main St. Springfield, OH 44123 1 Exempt Sarah H. Smith 2/26/15 LESSON 12-2

EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONS page 348 1 What would the withholding be for Eric Bates who is married with 2 allowances earning $1,090 twice per month? 2 3 1. Select the appropriate table. 2. Locate the employee’s total earnings. 3. Intersection of wages and number of allowances column. LESSON 12-2

Additional Payroll Taxes Both the employer and employee are responsible for paying social security and Medicare payroll taxes. Social Security tax deducts 6.2% of an employee’s gross earnings Medicare tax deducts 1.45% of an employee’s gross earnings LESSON 12-2

EMPLOYEE SOCIAL SECURITY AND MEDICARE TAX     Calculate Social Security Tax Deduction Total Social Security Social Security Earnings  Tax Rate = Tax Deduction $1,090.00  6.2% = $67.58 $1,090.00 x .062 = $67.58     Calculate Medicare Tax Deduction Total Medicare Medicare Earnings  Tax Rate = Tax Deduction $1,090.00  1.45% = $15.81 $1,090.00 x .0145 = $15.81 Lesson 13-2, page 312

50.00 67.58 15.81 Social Security 6.2% Medicare 1.45% LESSON 12-2

CHART 6.2% 1.45% LESSON 12-2