LESSON 13-2 Recording Employer Payroll Taxes

PAYMENT OF TAXES TO GOVERNMENT Two Types of Taxes paid 1.Salary Taxes and Deductions Taxes & deductions you make on employee’s behalf – employee really is paying, business collects and sends to the government for employee. 2.Payroll Taxes: taxes the business owes Four taxes employers owe to government? Social Security Tax Medicare Tax Federal Unemployment tax State Unemployment tax Federal Income, Social Security, and Medicare Taxes Health, Bonds, and United Way

UNEMPLOYMENT TAX Social Security Tax: Fund for elderly, survivors, or disabled 6.2% of employee’s gross earnings (match) Medicare Tax Medical coverage for the elderly age 65 or older 1.45 of employee’s gross earnings (match)

UNEMPLOYMENT TAX Unemployment tax Paid by business (not employees) Required per Federal Unemployment Insurance laws Pays workers benefits for limited periods of unemployment Two steps to figure unemployment tax 1.Determine the Unemployment taxable earnings amount Only the first $7000 of total earnings are subject to tax 2. Calculate two types of Unemployment tax for all employees Federal Unemployment tax =.8% of earnings up to $7000 (accumulated) State Unemployment tax = 5.4% of earnings up to $7000 (accumulated)

UNEMPLOYMENT TAXABLE EARNINGS 1.Enter accumulated earnings from Previous Pay Period 2.Enter total earnings for this pay period 3. Determine amount of Unemployment Taxable Earnings 4. Total the Unemployment Taxable Earnings For all Employees. EARINGS RECORD FOR QUARTER ENDEDDecember 31, 2010 Employee No:3 Selby Rick E MARITAL STATUSM Withholding Allowances 4 LAST NAME FIRST NAMEMIDDLE Rate of Pay12.00 Social Security Number: Positi on Sales Clerk Pay PeriodEarningsDeductions Net Pay Accumulated Earnings EndedRegular Overtim eTotal Federal Income Tax Soc. Sec. Tax Medicare Tax Health InsuranceOtherTotal 18, /15/ B , /31/ , /15/ , /30/ , /15/ , Quarterly Totals

6 Federal Unemployment Tax = Federal Unemployment Tax Rate × Unemployment Taxable Earnings State Unemployment Tax = State Unemployment Tax Rate × Unemployment Taxable Earnings UNEMPLOYMENT TAXES $6.32 = × $ $42.66=.054 ×$790.00

JOURNALIZING PROCESS 1.Record & Pay Employee Payroll Taxes (Lesson 1) Pay taxes Employee owes = Salary Expense 2.Record Business/Employer Payroll Taxes Pay Taxes the Employer Owes = Payroll Tax Expense (Dr) Social Security 6.2% - What account? (CR) Medicare 1.45% - What Account? (CR) Federal Unemployment.8% - What Account? (Cr) State Unemployment 5.4% - What Account? (Cr) Are we paying these right now or later? What journal will we use? No Cash Payment, therefore must use the general journal

TAXES TOGETHER Payroll Tax Expense = taxes the business owes Does Payroll Tax Expense increase as a Debit or Credit? How much is each payroll tax? Payroll Tax Exp. Social Security Tax Pay: Medicare Tax Pay: Federal Unemployment tax Pay: State Unemployment tax Pay : Debit Federal Unemployment tax: 6.32 State Unemployment tax: 42.66

9 JOURNALIZING EMPLOYER PAYROLL TAXES December 15. Recorded (not paid) 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. Journalize Transaction: What Journal will you use?

JOURNALIZING EMPLOYER PAYROLL TAXES Enter the debit amount. 1. Enter the date. 5. Enter each payable account 2. Enter expense account debited. 6. Enter the credit amounts. 3. Enter the memorandum number. General JournalPage # DateAccount Title Doc No. Post. Ref DebitCredit December 15 th Memorandum 63 Total Payroll Exp: Social Security Tax: $ Medicare Tax: Federal Unemployment tax: 6.32 State Unemployment tax: 42.66

TERMS REVIEW federal unemployment tax state unemployment tax 11

REVIEW WTG 13-2

Calculate the Tax Amounts: Total Payroll Exp: Social Security Tax: Medicare Tax: Federal Unemployment tax: State Unemployment tax: