Preparing Payroll Time Cards

LESSON 12-1

The money paid for employee services is called a salary.

The period covered by a salary payment is called a pay period.

A business may decide to pay employee salaries every week, every two weeks, twice a month, or once a month. Hobby Shack uses a semimonthly pay period. Employees are paid twice a month, on the 15th and last day of each month.

Paying Employees

The total amount earned by all employees for a pay period is called a payroll.

The payroll is reduced by state and federal taxes and other deductions, such as health insurance, to determine the amount paid to all employees. Special payroll records support the recording of payroll transactions in a journal. The business also uses these records to inform employees of their annual earnings and to prepare payroll reports for the government.

Paying Employees

LESSON 12-1 4

ANALYZING A PAYROLL TIME CARD page 341

LESSON 12-1 5

CALCULATING EMPLOYEE HOURS WORKED

4. Add the Hours column.

page 342

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3. Add Hours Reg and Hours OT columns and enter the totals.

2. Calculate the number of overtime hours and enter the amounts.

1. Calculate the number of regular hours for each day and enter the amounts.

LESSON 12-1 6

CALCULATING EMPLOYEE TOTAL EARNINGS page 343

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1. Enter the rate for regular time in the Rate column.

2. Calculate the regular earnings. Enter the amount.

3. Enter the rate for overtime.

4. Calculate the overtime earnings. Enter the amount.

5. Add the Amount column to calculate total earnings. Enter the amount of total earnings.

7LESSON 12-1

salarypay periodpayrolltotal earnings

TERMS REVIEW page 344

Determining Payroll Tax Withholding

LESSON 12-2

Taxes based on the payroll of a business are called payroll taxes.

A business is required by law to withhold certain payroll taxes from employee salaries. All payroll taxes are based on employee total earnings.

Errors in payroll records could cause incorrect payroll tax payments. Federal and state governments may charge a business a penalty for failure to pay correct payroll taxes when they are due.

Payroll Taxes

Required in all 50 states:Federal Income Tax State Tax City TaxCounty Tax

The information used to determine the amount of income tax withheld is identified on Form W-4, Employees Withholding Allowance Certificate.

A deduction from total earnings for each person legally supported by a taxpayer, including the employee, is called a withholding allowance.

Employee Income Tax

LESSON 12-2 11

EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE

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1. Write the employee’s name and address2. Write the employee’s social security number.3. Check the appropriate marital status block.4. Write the total number of withholding allowances claimed.5. The employee signs and dates the form.

LESSON 12-2 12

EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONSpage 348

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1. Select the appropriate table.

2. Locate the employee’s total earnings.

3. Intersection of wages and number of allowances column.

The Federal Insurance Contributions Act (FICA) provides for a federal system of old age, survivors, disability, and hospital insurance. A federal tax paid for old-age, survivors, and disability insurance is called social security tax.

A federal tax paid for hospital insurance is called Medicare Tax. Each of these taxes is accounted for and reported separately.

 The maximum amount of earnings on which a tax

is calculated is called a tax base.

Employee Social Security and Medicare Tax

Ex. The social security tax rate base and tax rate at

any time. The social security tax rate and base used in this text are 6.2% of earnings up to a maximum of $87,000 in each calendar year.

Ex. Total earnings x Social Security Tax Rate =

Social Security Tax Deduction $1,137.00 x 6.2% = $70.49

Employee Social Security and Medicare Tax

15LESSON 12-2

payroll taxeswithholding allowancesocial security taxMedicare taxtax base

TERMS REVIEW page 350

Preparing Payroll Records

LESSON 12-3

A business form used to record payroll information is called a payroll register.

The total earnings paid to an employee after payroll taxes and other deductions is called a net pay.

Payroll Register

LESSON 12-3 18

PAYROLL REGISTER

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8. Health insurance premium deductions2. Payment date

3. Employee personal data9. Other employee payroll deductions

4. Earnings10. Total deductions

5. Federal income tax withheld11. Net pay

6. Social security tax withheld12. Total, prove, and rule

7. Medicare tax withheld13. Check number

1. Pay period date

A business form used to record details affecting payments made to an employee is called an employee earnings record.

Employee Earnings Records

LESSON 12-3 20

EMPLOYEE EARNINGS RECORDS page 353

7. Total and prove

5. Earnings, deductions, net pay

2. Employee personal data

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1. Last day of quarter

4. Pay period

3. Beginning accumulated earnings

6. Updated accumulated earnings

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payroll registernet payemployee earnings record

TERMS REVIEW page 355

Preparing Payroll Checks

LESSON 12-4

23LESSON 12-4

1.Prepare the check stub.

PAYROLL BANK ACCOUNT page 356

2. Prepare the check.

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LESSON 12-4 24

EMPLOYEE’S PAYROLL CHECK page 357

1. Prepare the check stub of each employee’s payroll check.

2. Prepare each employee’s payroll check.

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