1. LESSON 13-4 Paying Payroll Taxes and Unemployment Taxes

2. PROCESS Record Employee Payroll Taxes Salary Expense Federal Income, Social Security, Medicare & Deductions (UW) Record Employer Payroll Taxes Payroll Tax Expense Social Security 6.2%, Medicare 1.45%, Federal Unemployment.8%, State Unemployment 5.4% Report ALL taxes to Government Form 941 (quarterly), W3 and W2 (yearly) Pay ALL Withholding taxes to Government Employee and Employer Payroll Taxes

3. Record Employee Payroll Taxes – Each Payroll Period Record Employer Payroll Taxes – Each Payroll Period

4. WHEN TO PAY GOVERNMENT Payments for taxes to Government: Called a deposit Can be paid by three different methods: Next banking day after payroll period Semi-weekly Monthly Two amounts determine frequency of paying government taxes Amount of taxes collected in the current period AND Amount of taxes owed during a prior 12-month period Large amounts of taxes = payments every few days Low amounts of taxes = payments once a month Less than $50,000 in previous 4 quarters = monthly

5. PAYING EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX lookback period: 12-month period that ends on June 30 th of the prior year Examples: For 2010: twelve-month period ending June 30 of 2009: if <50,000 monthly depositor

6. PROCESS Record Employee Payroll Taxes – Each Payroll Federal Income, Social Security, Medicare Record Employer Payroll Taxes – Each Payroll Social Security 6.2%, Medicare 1.45%, Federal Unemployment.8%, State Unemployment 5.4% Report taxes to Government – Quarterly/Yearly Form 941 (quarterly) – By end of month following quarter W3 and W2 (yearly) Pay Withholding taxes to Government Pay both employee and employer taxes Pay payroll taxes by 15th of next month Pay unemployment taxes - by end of month following each quarter

7. NEW EMPLOYERS New Employers: Monthly schedule depositors for the first year of business New employers fill out the 8109 coupon book

8. Calculating Payroll Tax What accounts are impacted and how? Do Payables Increase or Decrease? When Paid? January 15. Check No. 347.Paid cash for liability for employee income tax, for the month of December. Refer to your General Journal and Payments Journal for your numbers to complete this. DEC15 th Dec 31 st Total Employee Income Tax for December Total Employee Income Tax Social security tax for employee Social security tax for employer Total Social Security Medicare tax for employee Medicare tax for employer Total Medicare Total Payroll Tax Paid for the Month of December: Dec 31 st : Total fed: $383, SS $351.39, Medicare $82.17

9. JOURNALIZING EMPLOYEE PAYROLL TAXES Page: 15 Date Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit January 15. Paid cash for liability for month of December employee income tax, $764.00; social security tax, $1411.00; and Medicare tax, $330.00; total, $2,505. Check No. 347. (employee and employer taxes)

10. COUPON 8109, FEDERAL DEPOSIT COUPON Cash Payments Journal Page: 4 DateAccount Title Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit Jan15Employee Income Tax Payable347 764.00 2505.00 Social Security Tax Payable 1411.00 Medicare Tax Payable 330.00 250500

11. JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367. What Journal will you use? When is Unemployment paid? What quarter are we paying for? What accounts are impacted and how? By end of next month after quarter Fourth – Oct - Dec Cash Payments

12. JOURNALIZING PAYMENT OF FEDERAL UNEMPLOYMENT TAX January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367. Cash Payments Journal Page: 4 DateAccount Title Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit Jan15Employee Income Tax Payable347 764.00 2505.00 Social Security Tax Payable 1411.00 Medicare Tax Payable 330.00

13. COUPON 8190 - FEDERAL UNEMPLOYMENT

14. JOURNALIZING PAYMENT OF STATE UNEMPLOYMENT TAX January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $233.55. Check No. 368. Cash Payments Journal Page: 4 DateAccount Title Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit Jan15Employee Income Tax Payable347 757.00 2505.00 Social Security Tax Payable 1411.00 Medicare Tax Payable 330.00 31 Unemployment Tax Payable – Federal 367 34.60

15. COUPON 8109 – STATE UNEMPLOYMENT

16. PURCHASE SAVINGS BONDS What accounts are impacted and how? Do Payables Increase or Decrease? January 15. Paid cash for US Savings Bonds for employees, $150.00 C347 Decrease as Debit

17. February 1. Paid cash for US Savings Bonds for employees, $150.00 C369 RECORD PURCHASE SAVINGS BONDS Cash Payments Journal Page: 4 DateAccount Title Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit Jan15Employee Income Tax Payable347 764.00 2505.00 Social Security Tax Payable 1411.00 Medicare Tax Payable 330.00 31 Unemployment Tax Payable – Federal 367 34.60 31 Unemployment Tax Payable – Federal 368 233.55 s

18. TERMS REVIEW lookback period

19. REVIEW WTG 13-4

20. Cash Payments Journal Page: DateAccount Title Ck No Post. Ref General Accounts Payable Debit Purchases Discount Credit Cash Credit DebitCredit Dec15 Salary Expense C315 5650.00 4051.10 Employee Income Tax Pay 371.00 Social Security Tax Pay 350.30 Medicare Tax Payable 81.93 U.S Savings Bonds 25.00 Dec31 Salary Expense C330 5729.00 4880.23 Employee Income Tax Pay 385.50 Social Security Tax Pay 355.20 Medicare Tax Payable 83.07 U.S. Savings Bonds 25.00

21. General JournalPage # DateAccount Title Doc No. Post. Ref DebitCredit Dec15Payroll Tax ExpenseM56 47931 Social Security Tax Payable 35030 Medicare Tax Payable 8193 Unemployment Tax Payable - Federal 980 Unemployment Tax Payable- State 3728 Dec31Payroll Tax Expense M63 Social Security Tax Payable 47106 35520 Medicare Tax Payable 8307 Unemployment Tax Payable - Federal 823 Unemployment Tax Payable- State 2456