1. Preparing Payroll Records
Accounting 1
Chapter 12

2. Paying Employees Payroll time cards (p. 341) Employee number and Name
Pay Period Ending
Morning and Afternoon
Overtime
Total Hours Regular and OT

3. Calculating Hours Worked
Time clocked OUT am -Time clocked IN am = Hours Worked am
Time clocked OUT pm – Time clocked in pm = Hours Worked pm
Hours worked am + Hours worked pm = Total Regular Hours for that day (usually 8)
Anything after 40 hours is usually OT

4. Calculating Earnings Regular hours * Regular Rate = Regular Earnings
Overtime: Regular Rate * 1.5 = Overtime Earnings
Regular earnings + OT earnings = Total Earnings

5. Determining Payroll Tax Withholding
Employers are required to withhold employee payroll tax from each employee’s paycheck.
Payroll tax is a percentage of an employees gross pay.
Many states require that employers withhold state, city, and/or county income tax as well as federal income taxes.
The amount withheld from an employee’s gross pay is determined by the employee’s martial status and number of dependents.
Each employee is required to complete a W-4 form. (Employee’s withholding allowance certificate) which provides the employer with the information need to deduct income tax.

6. Employee income tax withholding tables (pg. 348)
Tables are made for single and married persons for various pay periods (weekly, biweekly, semimonthly, monthly and daily misc.)
1. select appropriate table
2. locate total earnings
3. Follow across to the number of withholding allowances claimed.

7. Employee Social Security and Medicare Tax
Social Security Tax is for old-age, survivors, and disability insurance. (6.2%)
Medicare Tax is for hospital insurance for individuals over 65 years old. (1.45%)
Social Security and Medicare tax is calculated as a percentage of gross pay
The max amount paid out is called a tax base and is adjusted each year.