Chapter 14 Payroll Accounting, Taxes, and...

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Chapter 14

Payroll Accounting, Taxes, and Reports

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Different forms of Payroll Information

  Account are kept in the general ledger to summarize total earnings and deductions for ALL employees.

  The payroll register and employee earnings records provide all the information needed to prepare a payroll and payroll tax reports.

  Journal entries are made to record the payment of payroll and employer payroll taxes.

  Quarterly and annual payroll tax reports are required to report the payment of payroll taxes.

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PAYROLL REGISTER

Lesson 14-1, page 340

  Column totals of a payroll register provide the debit and credit amounts needed to journalize a payroll.

  Earnings Total column = Salary Expense Debit   Each deduction total column = “Name of deduction

Payable” Credit   Net Pay total column = Cash Credit

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ANALYZING PAYMENT OF PAYROLL


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JOURNALIZING PAYMENT OF A PAYROLL

December 15. Paid cash for semimonthly payroll, $2989.02 (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

Entered Debit side Credit side Credit side Credit side Credit side Credit side Credit side Credit side

Change Increased Increased Increased Increased Increased Increased Increased Decreased


Classification Expense Liability Liability Liability Liability Liability Liability Asset

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JOURNALIZING PAYMENT OF A PAYROLL


5 1 3

2

3. Write the check number.

1. Write the date.

4. Write the amount debited to Salary Expense.

2. Write the title of the account debited.

5. Write the amount credited to Cash. 6. Write the titles of the accounts credited. 7. Write the credit amounts.

4

7 6

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14-1 Assignments

  p. 343 Audit Your Understanding

  p. 343(p. 307) Work Together

  p. 343 (p. 308) On Your Own

  p. 361 (p. 315) Application Problem 14-1

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Chapter 14-2

Recording Employer Payroll Taxes

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Calculating Employer Payroll Taxes

  Employers must pay four separate payroll taxes: –  Social Security Tax –  Medicare Tax –  Federal Unemployment Tax –  State Unemployment Tax

  Social Security and Medicare Taxes are paid by both the employee and the employer.

  Employers must match what their employees pay for Social Security (6.5%) and Medicare Taxes (1.5%)

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  Federal Unemployment Tax   A federal tax used for state and federal

administrative expenses of the unemployment program.

  The total earnings subjected to unemployment tax is referred to as unemployment taxable earnings.

  The federal unemployment tax is .8% of the first $7,000.00 earned by each employee for each calendar year.

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  State Unemployment Tax   A state tax used to pay benefits to unemployed

workers.

  The state unemployment tax is 5.4% of the first $7,000.00 earned by each employee for each calendar year.

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1. Enter accumulated earnings and total earnings for each employee.

UNEMPLOYMENT TAXABLE EARNINGS


3

1 1 2

3. Total the unemployment taxable earnings column. 2. Enter unemployment taxable earnings.

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UNEMPLOYMENT TAXES

Unemployment Federal Federal Taxable Unemployment Unemployment

Earnings Tax Rate = Tax $183.75 0.8% = $1.47


Unemployment State State Taxable Unemployment Unemployment

Earnings Tax Rate = Tax $183.75 5.4% = $9.92

Calculate Unemployment Taxes—State

Calculate Unemployment Taxes—Federal

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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

Entered Debit side Credit side Credit side Credit side Credit side

Change Increased Increased Increased Increased Increased


Classification Expense Liability Liability Liability Liability

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JOURNALIZING EMPLOYER PAYROLL TAXES


5

1 3 4 2

3. Write the memorandum number.

1. Write the date.

4. Write the debit amount.

2. Write the expense account debited.

5. Write the titles of the liability accounts credited. 6. Write the credit amounts.

6

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14-2 Assignments


  p. 348 (p. 309) Work Together

  p. 348 (p. 310) On Your Own


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Chapter 14-3

Reporting Withholding and Payroll Taxes

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Employer Annual Report to Employees of Taxes Withheld

  Form W-2 Wage and Tax Statement   An annual report showing total year’s earnings and

the amounts withheld for taxes for an employee.   Each employee must receive one by January 31st of

the next year.

  4 copies of the W-2 are prepared (A-D) A.  Sent to Social Security Administration B.  Sent to the Employee (Attached to Tax Form) C.  Sent to the Employee D.  Kept for the business’s records

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EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD


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Preparing Employer’s Quarterly Federal Tax Return

  Each employer must file a quarterly federal tax return showing taxes due to the government: –  Federal Income Tax –  Social Security Tax –  Medicare Tax

  This information is reported every three months on Form 941: Employer’s Quarterly Federal Tax Return

  Form 941 is filed before the last day of the month following the end of a calendar quarter.

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EMPLOYER’S QUARTERLY FEDERAL TAX RETURN


5

1

4 2

3. Total Quarterly Earnings

1. Heading

4. Income Tax Withheld

2. Number of Employees

5. Employee and Employer Social Security and Medicare Taxes

6. Social Security plus Medicare Taxes

7. Total Taxes 8. Total Taxes for Each

Month 9. Total Taxes

6

9

7

8

3

3

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PREPARING EMPLOYER’S QUARTERLY FEDERAL TAX RETURN


Total Earnings Tax Rate = Tax

Social Security $22,575.00 13% = $2,934.75 Medicare $22,575.00 3% = $ 677.25

Employee Employer Social Social

Federal Income Security and Security and Federal Tax Tax Withheld + Medicare Tax + Medicare Tax = Liability

Calculate Social Security and Medicare Taxes

Calculate Social Security and Medicare Taxes

Dec. 1-15 $273.00 + $304.33 + $304.33 = 881.66 Dec. 16-31 $269.00 + 302.08 + $302.08 = $873.16 Totals $542.00 + 606.41 + 606.41 = $1,754.82

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Employer Annual Reporting of Payroll Taxes

  Form W-3, Transmittal of Wage and Tax Statements   Reports the previous year’s earnings and payroll

taxes withheld for all employees.

  Sent to the Social Security Administration by February 28 each year.

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EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES


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14-3 Assignments



  p. 353 (p. 312) On Your Own


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Chapter 14-4

Paying Withholding and Payroll Taxes

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Paying the Liability for Employee Income Tax, Social Security Tax, and Medicare Tax

  Employers must pay to the federal, state, and local governments all payroll taxes withheld from employee earnings as well as the employer payroll taxes.

  Monthly Scheduled Depositor   Must pay the total amount due to an authorized

financial institution by the 15th day of the following month accompanied by Form 8109, Federal Tax Deposit Coupon.

  Payment must be made through an authorized agent to the IRS by Electronic Federal Tax Payment System (EFTPS).

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FORM 8109, FEDERAL DEPOSIT COUPON


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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, $1,754.82. Check No. 330.

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Paying the Liability for Federal Unemployment Tax

  Federal Unemployment insurance is paid by the end of the month following each quarter if the liability amount is more than $100.

  Paid by sending a check to an authorized bank.

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PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX


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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.


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JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX


January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $56.70. Check No. 344.

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14-4 Assignments



  p. 359 (p. 314) On Your Own


  P. 362 (p. 323) Mastery Problem 14-5

  P. 363 (p. 326) Challenge Problem 14-6

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14-6 Challenge Problem

General Ledger Account Balances as of April 30th   Employee Income Tax Payable: 0.00   Social Security Tax Payable: 0.00   Medicare Tax Payable: 0.00   Unemployment Tax Payable-Federal: 0.00   Unemployment Tax Payable-State: 0.00   U.S. Savings Bond Payable: 0.00   Payroll Taxes Expense: 5,191.40 Debit   Salary Expense: 36,559.00 Debit

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