Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 10 Employer Payroll Tax Reporting
10-2 Learning Objective 1 Describe laws that impact an employer’s payroll obligations. A business obtains its employer identification number (EIN) by completing Form SS-4. Form SS-4 requests general information about the business. LO1
10-3 Laws Impacting Employer’s Payroll Tax Under the Federal Insurance Contributions Act (FICA), employers must pay the same amounts as its employees for Social Security and Medicare taxes. A self-employed person pays both the employee and employers share of 15.3%. LO1
10-4 Laws Impacting Employer’s Payroll Tax Federal and State Unemployment Tax Acts Federal Unemployment Tax (FUTA) - For 2009, employers pay 6.2% on the first $7,000 earned by each employee. This amount can be reduced by a credit of up to 5.4% if the employer has a good employment history. State Unemployment Tax (SUTA) - For 2009, the base rate is 5.4% on the first $7,000 earned by each employee. This rate is adjusted for the employer’s merit rating. LO1
10-5 Learning Objective 2 Compute employer FICA taxes and record them in a general journal. Peter Parser, an employee of Matrix, Inc., earns gross pay of $500 per week. The social security rate is 6.2% on the first $106,800 of earnings, and the Medicare rate is 1.45% on all earnings. We are in the process of calculating the employer’s payroll taxes for the week ended January 5, Social Security $ × 6.2% $31.00 Medicare $ × 1.45% $7.25 LO2
10-6 Payroll Tax Deposit Below is an example of Matrix’s computed total taxes payable for the week ended January 31 st. They include the amounts withheld from employees’ paychecks and the matching employer FICA taxes. LO2
10-7 Learning Objective 3 Journalize an employer’s deposit of federal income taxes and FICA taxes withheld, and prepare a deposit coupon. Journal Entry to Record Payroll Taxes LO3 The total amount deposited may be paid either by check or electronic funds transfer. If the payment is made by check, Form 8109 must accompany the deposit.
10-8 Learning Objective 4 Prepare Form 941, Employer’s Quarterly Federal Tax Return. Each calendar quarter the employer must file Form 941, Employer’s Quarterly Federal Tax Return. LO4
10-9 Learning Objective 5 Prepare Form W-2, Employee’s Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements. Form W-2 Form W-3 LO5
10-10 Learning Objective 6 Compute an employer’s state and federal unemployment taxes and record them in a general journal. Phoenix Sales and Service provides the following schedule of gross pay in the first quarter of the year. Based on its great employment history, the company pays a SUTA rate of 2.7% on the first $7,000 of wages per employee and a 0.8% FUTA rate. LO6
10-11 Computing Employer’s Unemployment Taxes LO6
10-12 Learning Objective 7 Prepare unemployment tax returns. Employers report quarterly unemployment taxes by completing Form 940 LO7
10-13 Learning Objective 8 Compute and record workers’ compensation insurance premiums for an employer. Phoenix Sales and Service has two types of workers: office and landscapers. The company pays workers’ compensation of $0.30 per $100 of office worker wages and $2.50 per $100 of landscapers’ wages. We estimate that in the coming year office workers will earn $53,000 and landscapers $107,000. LO8
10-14 Workers’ Compensation Insurance At the end of the year, Phoenix determines the following actual wages were paid. LO8
10-15 End of Chapter 10