LESSON 13-1 Payroll Accounting, Taxes, and Reports CHAPTER 13 4/20/2017 Payroll Accounting, Taxes, and Reports

13-1 RECORDING PAYROLL page 369 The payroll register and employee earnings records provide all the payroll information need to prepare payroll and payroll tax reports. The payroll journal entry is based on the total of the Earnings Total columns, each deduction column, and the Net Pay column,

ANALYZING PAYMENT OF A PAYROLL page 370 Remember Debits = Credits!

JOURNALIZING PAYMENT OF A PAYROLL page 371 December 15. Paid cash for payroll, $4,609.46. Check No. 335. 2 1 3 4 5 6 7 1. Write the date. 5. Write the total amount paid to employees. 2. Write the title of the account debited. 6. Write the titles of accounts credited. 3. Write the check number. 7. Write the amounts credited. 4. Write the account debited.

13-2 RECORDING EMPLOYER PAYROLL TAXES Employers must pay to the government taxes withheld from employee earnings. -The amounts withheld are liabilities until they are paid. Employers must ALSO pay several of their own payroll taxes: Social Security (6.2% on earnings up to $87,000.00) Medicare Tax (1.45% no earnings cap) Federal Unemployment Tax State Unemployment Tax These taxes are based on a percentage of total employee earnings.

UNEMPLOYEMENT TAXABLE EARNINGS page 374 2 1 3 1. Enter accumulated earnings and total earnings for each employee. 2. Enter unemployment taxable earnings. 3. Total the Unemployment Taxable Earnings column.

UNEMPLOYMENT TAXES page 375 Federal Unemployment Tax - A federal tax used for state and federal administrative expenses of the unemployment program. (.8% on first $7,000.00 of total earnings) Federal Unemployment Tax = Federal Unemployment Tax Rate × Unemployment Taxable Earnings $790.00 × 0.8% = $6.32 State Unemployment Tax - A state tax used to pay benefits to unemployed workers. (5.4% on first $7,000.00 of total earnings) State Unemployment Tax = State Unemployment Tax Rate × Unemployment Taxable Earnings $790.00 × 5.4% = $42.66

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, $42.66. Memorandum No. 63. The liability is incurred when salaries are paid. The transaction to record payroll taxes is journalized the same day the payroll is journalized.

JOURNALIZING EMPLOYER PAYROLL TAXES LESSON 13-1 4/20/2017 JOURNALIZING EMPLOYER PAYROLL TAXES (continued from previous slide) page 376 2 4 1 3 5 6 1. Write the date. 4. Write the debit amount. 2. Write the title of the expense account debited. 5. Write the titles of the liability accounts credited. 3. Write the memorandum number. 6. Write the credit amounts.

13-3 Reporting Withholding and Payroll Taxes page 378 W-2 Wage and Tax Statement - is a report prepared by the employer that shows total year’s earnings and amounts withheld for taxes for an employee. You get the info from the employee earnings record W2 is an IRS form Employers are required by law to furnish a W-2 to each employee by Jan 31. Employees attach copies to federal and state & local tax returns.

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued on next slide) Each employer must file a quarterly federal tax return showing federal income tax, social security tax, and Medicare tax due the gov’t. Form 941 is submitted every three months. Filed the last day of the month following the end of the calendar quarter. Info needed to prepare Form 941 is obtained from the employee earnings record. 1 2 1. Heading 2. Number of employees

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

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379 (continued from previous slide) 9 8 8. Total taxes for each month 9. Total taxes

EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES LESSON 13-1 4/20/2017 EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES page 381 Form W-3, Transmittal of Wage and Tax Statement is sent to the Social Security Administration by February 28 each year. Reports the previous years earnings and payroll taxes withheld for all employees. A copy of each employee Form W-2 is attached to the Form W-3. Companies with 250+ have to send to IRS electronically.

13-4 Paying Withholding & Payroll Taxes Employers must pay to the federal, state, and local governments all payroll taxes withheld from employee earnings as well as the employer payroll taxes. The payment of payroll taxes with the government is referred to as a Deposit. Two amounts determine how often deposits are made to the federal government. The amount of payroll taxes collected during the current deposit period. The amount of payroll taxes owed during the prior 12-month period. -the 12-month period that ends on June 30th of the prior year is called the lookback period.

LESSON 13-1 4/20/2017 PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 383

FORM 8109, FEDERAL DEPOSIT COUPON page 384 This form is used to deposit federal, social security and Medicare taxes. -Hobby Shack pays monthly. -Deposit with an authorized bank or electronically.

JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 385 January 15. Paid cash for liability for employee income tax, $757.00; social security tax, $1,451.38; and Medicare tax, $339.42; total, $2,547.80. Check No. 347. 1 5 3 2 4 1. Write the date. 3. Write the check number. 2. Write the titles of the three accounts debited. 4. Write the debit amounts. 5. Write the amount of the credit.

PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 386 Federal unemployment insurance is paid by the end of the month following each quarter if the liability amount is more than $100. -all outstanding amounts are due at the end of the calendar year. -deposit with an authorized bank.

JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 387 January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367. 1 2 3 4 5 1. Write the date. 2. Write the title of the account debited. 3. Write the check number. 4. Write the debit amount. 5. Write the amount of the credit to Cash.

JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX LESSON 13-1 4/20/2017 JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX page 387 January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $233.55. Check No. 368. 1 2 3 4 5 1. Date 2. Account debited 3. Check number 4. Debit amount 5. Credit amount