Presentation on theme: "Payroll Accounting, Taxes, and Reports"— Presentation transcript:
1 Payroll Accounting, Taxes, and Reports Chapter 14Payroll 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 recordSeparate payroll accounts for each employee are NOT kept in general ledgerTOTAL Payroll and Deductions Summarized and recorded in Cash Payments Journal/posted to the General LedgerSource Document is a check stubYou need the payroll register to make out the check stub (made out to Payroll Account).
5 Journal entries are based on TOTALS of: Total Earnings column Lesson 14-1 (GJ)PAYROLL REGISTERJournal entries are based on TOTALS of:Total Earnings columnEACH Individual Deduction columnNet Pay columnLesson 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 PayableCredit Federal Income Taxes PayableCredit Health Insurance PayableCredit all OTHER deductionsT-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 AffectedSalary ExpenseEmployee Income Tax PayableSocial Security Tax PayableMedicare Tax PayableHealth Insurance Premiums PayableU.S. Savings Bond PayableUnited Way Donations PayableCashClassificationExpenseLiabilityAssetChangeIncreasedDecreasedEnteredDebit sideCredit side
9 JOURNALIZING PAYMENT OF A PAYROLL 42531671. 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.
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) = .008State Unemployment Tax - 5.4% = .054Unemployment is applied to first $7000 earned by EACH employeeTAXES are based on percentage of employee TOTAL earningsALL 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 year2131. Enter accumulated earnings and total earnings for each employee.2. Enter unemployment taxable earnings.3. Total the unemployment taxable earnings column.
14 Recording Employer’s Payroll Taxes Recorded in the GENERAL JOURNALSource Document is a MEMOBOTH Salary Expense and Payroll Tax Expense are recorded on the same dateDebit Payroll Taxes Expense (Total of taxes)Credit FICA Taxes PayableCredit Unemployment Taxes Payable - Fed.Credit Unemployment Taxes Payable – StateThe 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 AffectedPayroll Taxes ExpenseSoc. Security Tax Pay.Medicare Tax PayableUnemp. Tax Pay.—Fed.Unemp. Tax Pay.—StateClassificationExpenseLiabilityChangeIncreasedEnteredDebit sideCredit sideMedicare Tax PayableUnemployment Tax Payable—FederalUnemployment Tax Payable—StateSocial Security Tax PayablePayroll Taxes Expensenormal balancenormal balancenormal balance315.7257.07247.26normal balancenormal balance1.479.92
16 JOURNALIZING EMPLOYER PAYROLL TAXES 2134561. 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 348On your own, pg 348Application problem 14-1, 14-2, pg 361READ 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 StatementEmployer 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 employeeB gets mailed in to IRS when filing taxesC is employee’s record*Copy D is for the employer’s recordsCopies 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 lawIt reports the following that are due to the gov.:Total deductions for Soc. Sec. and MedicareFederal Income TaxesPayments made by employerInfo obtained from Payroll Register and Employee Earnings Record
22 EMPLOYER’S QUARTERLY FEDERAL TAX RETURN 1. Heading2. Number of Employees (1)13. Total Quarterly Earnings (2)4. Income Tax Withheld (3-5)5. Employee and Employer Social Security and Medicare Taxes (6-7)2346. Social Security plus Medicare Taxes (8)567. Total Taxes (11)78. Total Taxes for Each Month (17)9. Total Taxes (17d)89
23 PREPARING EMPLOYER’S QUARTERLY FEDERAL TAX RETURN Calculate Social Security and Medicare TaxesTotal Earnings Tax Rate = TaxSocial Security $22, 13% = $2,934.75Medicare $22, % = $Calculate Social Security and Medicare TaxesEmployee EmployerSocial SocialFederal Income Security and Security and Federal TaxTax Withheld + Medicare Tax + Medicare Tax = LiabilityDec $ $ $ =Dec $ $ = $873.16Totals $ = $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
26 Paying Withholding and Payroll Taxes CHAPTER 14-4Paying 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 endsQuarters end on the last days of March, June, Sept., and Dec.Use Deposit Form 8109READ PAGE 354 FOR TEST!
28 FORM 8109, FEDERAL DEPOSIT COUPON Lesson 14-1 (GJ)FORM 8109, FEDERAL DEPOSIT COUPONFederal Deposit Coupon – 8109Reports 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 PayableDebit Social Security Tax PayableDebit Medicare Tax PayableCredit 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 AffectedEmployee Inc. Tax Pay.Social Security Tax Pay.Medicare Tax PayableCashClassificationLiabilityAssetChangeDecreasedEnteredDebit sideCredit sideCashMedicare Tax PayableSocial Security Tax PayableEmployee Inc. Tax Payablenormal balancenormal balancenormal balance542.00985.40227.42normal balance1,754.82
31 JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX 134521. 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 AffectedUnemployment Tax Payable—FederalCashClassificationLiabilityAssetChangeDecreasedEnteredDebit sideCredit sideCashUnemployment Tax Payable—Federalnormal balancenormal balance8.408.40
34 JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX 123451. 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 TAX 123451. 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 359On your own, pg 359Application problem 14-3, 14-4