Payroll Liabilities & Tax Records Chapter 13 Business Accounting

Payroll affects all employees must be accurate and on-time includes many deductions needs to be journalized and posted money transferred to payroll account

Analyze and Journalize Employees’ Earnings Operating Expense Salaries Expense debit Withholdings Liabilities Payables (taxes payable, ins. prem. payable, etc..) credit Net Pay Lower Assets Cash in Bank

Required Withholdings Employees’ Federal Income Tax Payable Employees’ State Income Tax Payable Social Security Tax Payable Medicare Tax Payable

Voluntary Deductions U.S. Savings Bonds Payable Credit Union Payable Union Dues Payable United Way Payable

Payroll Journal Entry Salaries Expense Employees’ Federal Income Tax Payable Employees’ State Income Tax Payable Social Security Tax Payable Medicare Tax Payable U.S. Savings Bonds Payable Credit Union Payable Union Dues Payable United Way Payable 401(k) Payable Cash in Bank

Employer’s Payroll Taxes Employers pay taxes too! FICA Social Security Medicare Unemployment Taxes Federal State

FICA Federal Insurance Contribution Act of 1935 Social Security income replacement in retirement usually 6.2% currently 4.2% up to $110,100 for 2012 1.45% for Medicare provides medical insurance in retirement

Unemployment Taxes provide funds to unemployed workers Federal (FUTA) up to 6.2% of first $7,000 of earnings deduct up to 5.4% for state payments therefore, usually 0.8% of $7,000 for federal State (SUTA) laws vary

Journal Entry Payroll Tax Expense Social Security Tax Payable Medicare Tax Payable State Unemployment Taxes Payable Federal Unemployment Taxes Payable

Tax Payments and Reports paid at regular intervals

Federal Tax Payments one payment for federal taxes Social Security, Medicare, and Federal Income employee and employer made at bank or through EFTPS Electronic Federal Tax Payment System

Federal Tax Payments (con’t) usually by 15th of following month twice a month for big businesses with Form 8109 Federal Tax Deposit Coupon

State and Local Payments at regular intervals details differ by state / municipality

Tax Forms W-2 W-3 941 940 annual wage and tax statement annual transmittal of W-2’s 941 quarterly Federal Tax Return 940 annual FUTA Tax Return

W-2 W-2 annual summary to employee by January 31st each employee’s earnings and withholdings gross earnings federal withholdings FICA withholdings state and local withholdings to employee by January 31st copies sent to IRS, state, and local government

W-3 Transmittal of Wage and Tax Statements sent with W-2’s summary of all W-2 info due by Feb 28