1. Payroll Accounting, Taxes, and Reports
Chapter 14
Payroll Accounting, Taxes, and Reports

2. Analyze payroll transactions and record a payroll.
OBJECTIVES:
Define accounting terms related to payroll accounting, taxes, and reports.
Identify accounting concepts and practices related to payroll accounting, taxes, and reports.
Analyze payroll transactions and record a payroll.
Record employer payroll taxes.
Prepare a selected payroll tax reports.
Pay and record withholding and payroll taxes.

3. Different Forms of Payroll Information
Payroll for each period is recorded in one payroll register and several individual employee earnings record
Separate payroll accounts for each employee are NOT kept in general ledger
TOTAL Payroll and Deductions Summarized and recorded in Cash Payments Journal/posted to the General Ledger
Source Document is a check stub
You need the payroll register to make out the check stub (made out to Payroll Account).

4. Ch 14-1: Recording a Payroll

5. Journal entries are based on TOTALS of: Total Earnings column
Lesson 14-1 (GJ)
PAYROLL REGISTER
Journal entries are based on TOTALS of:
Total Earnings column
EACH Individual Deduction column
Net Pay column
Lesson 14-1, page 340

6. Recording Entry for Payroll – Cash Payments Journal
Debit Salary Expense (Gross Earnings)
Credit Cash (Net Earnings)
Credit FICA Taxes Payable (Soc. Sec. and Medicare)
Credit State Income Taxes Payable
Credit Federal Income Taxes Payable
Credit Health Insurance Payable
Credit all OTHER deductions
T-accounts will look like this…. 

7. ANALYZING PAYMENT OF PAYROLL
Lesson 14-1, page 341

8. JOURNALIZING PAYMENT OF A PAYROLL
December 15. Paid cash for semimonthly payroll, $ (total payroll, $3,803.75, less deductions: employee income tax, $273.00; social security tax, $247.26; Medicare tax, $57.07; health insurance premiums, $182.40; U.S. Savings Bonds, $35.00; United Way donations, $20.00). Check No. 312.
Accounts Affected
Salary Expense
Employee Income Tax Payable
Social Security Tax Payable
Medicare Tax Payable
Health Insurance Premiums Payable
U.S. Savings Bond Payable
United Way Donations Payable
Cash
Classification
Expense
Liability
Asset
Change
Increased
Decreased
Entered
Debit side
Credit side

9. JOURNALIZING PAYMENT OF A PAYROLL4 2 5 3 1 6 7
1. Write the date.
2. Write the title of the account debited.
3. Write the check number.
4. Write the amount debited to Salary Expense.
5. Write the amount credited to Cash.
6. Write the titles of the accounts credited.
7. Write the credit amounts.

10. TO DO:
Work Together, pg 343
On your own, pg 343

11. CHAPTER 14-2: Recording Employer Payroll Taxes
FICA – (paid by both employee and employer)
Employer Social Security - 6.5% (base-$65,400)
Medicare % (no base)
Total 8%
Federal Unemployment Tax – 0.8% (TOTAL is 6.2%, but 5.4% is deductible for the state tax) = .008
State Unemployment Tax - 5.4% = .054
Unemployment is applied to first $7000 earned by EACH employee
TAXES are based on percentage of employee TOTAL earnings
ALL are Liabilities until paid to the Fed and state agency

12. Lesson 14-1 (GJ)
UNEMPLOYMENT TAXABLE EARNINGS – first $7000 earned by each employee for each year 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.

13.         UNEMPLOYMENT TAXES
Calculate Unemployment Taxes—Federal    
Unemployment Federal Federal
Taxable Unemployment Unemployment
Earnings  Tax Rate = Tax
$  0.8% (.008) = $1.47
Calculate Unemployment Taxes—State    
Unemployment State State
Taxable Unemployment Unemployment
Earnings  Tax Rate = Tax
$  5.4% (.054) = $9.92

14. Recording Employer’s Payroll Taxes
Recorded in the GENERAL JOURNAL
Source Document is a MEMO
BOTH Salary Expense and Payroll Tax Expense are recorded on the same date
Debit Payroll Taxes Expense (Total of taxes)
Credit FICA Taxes Payable
Credit Unemployment Taxes Payable - Fed.
Credit Unemployment Taxes Payable – State
The FICA Taxes Payable account will show both the employer’s and employees tax.
Both are liabilities of the employers.

15. JOURNALIZING EMPLOYER PAYROLL TAXES
December 15. Recorded employer payroll taxes expense, $315.72, for the semimonthly pay period ended Dec. 15. Taxes owed are: social security tax, $247.26; Medicare tax, $57.07; federal unemployment tax, $1.47; state unemployment tax, $9.92. Memorandum No. 63.
Accounts Affected
Payroll Taxes Expense
Soc. Security Tax Pay.
Medicare Tax Payable
Unemp. Tax Pay.—Fed.
Unemp. Tax Pay.—State
Classification
Expense
Liability
Change
Increased
Entered
Debit side
Credit side
Medicare Tax Payable
Unemployment Tax Payable—Federal
Unemployment Tax Payable—State
Social Security Tax Payable
Payroll Taxes Expense
normal balance
normal balance
normal balance 
315.72 
57.07 
247.26
normal balance
normal balance  
1.47
9.92

16. JOURNALIZING EMPLOYER PAYROLL TAXES2 1 3 4 5 6
1. Write the date.
2. Write the expense account debited.
3. Write the memorandum number.
4. Write the debit amount.
5. Write the titles of the liability accounts credited.
6. Write the credit amounts.

17. TERMS REVIEW federal unemployment tax state unemployment tax TO DO:
Work Together, pg 348
On your own, pg 348
Application problem 14-1, 14-2, pg 361
READ chapter 14

18. Chapter 14-3: Reporting Withholding and Payroll Taxes

19. W-2 - Employer’s Report to Employees
IRS Form W-2, Wage and Tax Statement
Employer must give 4 copies to employee by January 31 of each year.
4 copies:
*Copy A is for Employer sends to Soc Sec Admin
*Copies B and C go to the employee
B gets mailed in to IRS when filing taxes
C is employee’s record
*Copy D is for the employer’s records
Copies are sent by employer to federal, state, and local governments.
Amounts are obtained from employee earnings records.

20. EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD
Lesson 14-1 (GJ)
EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD

21. Employer Quarterly Federal Tax Return - Form 941
Must be filed quarterly- required by law
It reports the following that are due to the gov.:
Total deductions for Soc. Sec. and Medicare
Federal Income Taxes
Payments made by employer
Info obtained from Payroll Register and Employee Earnings Record

22. EMPLOYER’S QUARTERLY FEDERAL TAX RETURN
1. Heading
2. Number of Employees (1) 1
3. Total Quarterly Earnings (2)
4. Income Tax Withheld (3-5)
5. Employee and Employer Social Security and Medicare Taxes (6-7) 2 3 4
6. Social Security plus Medicare Taxes (8) 5 6
7. Total Taxes (11) 7
8. Total Taxes for Each Month (17)
9. Total Taxes (17d) 8 9

23. PREPARING EMPLOYER’S QUARTERLY FEDERAL TAX RETURN
Calculate Social Security and Medicare Taxes    
Total Earnings  Tax Rate = Tax
Social Security $22,  13% = $2,934.75
Medicare $22, % = $
Calculate Social Security and Medicare Taxes    
Employee Employer
Social Social
Federal Income Security and Security and Federal Tax
Tax Withheld + Medicare Tax + Medicare Tax = Liability
Dec $ $ $ =
Dec $ $ = $873.16
Totals $ = $1,754.82

24. EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES: W-3 Transmittal of Income and Tax Statements
The employer must send this report with all the W-2’s prepared to the Social Security Administration by February 28.
Reports previous year’s earnings and all payroll taxes withheld

25. TO DO:
Work Together, pg 353
On your own, pg 353

26. Paying Withholding and Payroll Taxes
CHAPTER 14-4
Paying Withholding and Payroll Taxes

27. Payment of Withholding and Payroll Taxes
Omni – Monthly Schedule Depositor – payroll taxes are deposited with local authorized financial institution by the 15th of the following month after the quarter ends
Quarters end on the last days of March, June, Sept., and Dec.
Use Deposit Form 8109
READ PAGE 354 FOR TEST!

28. FORM 8109, FEDERAL DEPOSIT COUPON
Lesson 14-1 (GJ)
FORM 8109, FEDERAL DEPOSIT COUPON
Federal Deposit Coupon – 8109
Reports Federal income tax and FICA taxes that are being paid by employer.
Deposited with check at the bank.

29. Payment of any Payroll Liability
Entry recorded in Cash Payments Journal:
Source Document  Check stub.
Debit Employee Income Tax Payable
Debit Social Security Tax Payable
Debit Medicare Tax Payable
Credit Cash

30. JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX
January 15. Paid cash for liability for employee income tax, $542.00; social security tax, $985.40; and Medicare tax, $227.42; total, $1, Check No. 330.
Accounts Affected
Employee Inc. Tax Pay.
Social Security Tax Pay.
Medicare Tax Payable
Cash
Classification
Liability
Asset
Change
Decreased
Entered
Debit side
Credit side
Cash
Medicare Tax Payable
Social Security Tax Payable
Employee Inc. Tax Payable
normal balance
normal balance
normal balance 
542.00 
985.40 
227.42
normal balance
1,754.82 

31. JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX1 3 4 5 2
1. Write the date.
2. Write the title of the three accounts debited.
3. Write the check number.
4. Write the three debit amounts.
5. Write the amount of the credit to Cash.
Lesson 14-4, page 356

32. PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX – Form 8109
*Paid at end of month following each quarter to authorized bank
*ALL outstanding liabilities should be paid at end of Calendar year
*Form 8109 sent with unemployment tax pymt

33. JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX
January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $8.40. Check No. 343.
Accounts Affected
Unemployment Tax Payable—Federal
Cash
Classification
Liability
Asset
Change
Decreased
Entered
Debit side
Credit side
Cash
Unemployment Tax Payable—Federal
normal balance
normal balance 
8.40
8.40 

34. JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX1 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.

35. JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX1 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.
**Methods for payment vary by state

36. TO DO:
Work Together, pg 359
On your own, pg 359
Application problem 14-3, 14-4