Payroll Accounting, Taxes and Reports Chapter 14 Payroll Accounting, Taxes and Reports

Payroll Accounts Separate payroll accounts for each employee are not kept in the general ledger. Accounts are kept in the general ledger to summarize total earnings and deductions for all employees. Journal entries are made to record the payment of the payroll and the employer payroll taxes.

PAYROLL REGISTER The column totals provide the debit and credit amounts needed to journalize a payroll. The totals of the earnings regular, earnings overtime, and deductions total columns are not used to journalize payroll. Lesson 14-1, page 332

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 Classification Expense Liability Asset Change Increased Decreased Entered Debit side Credit side Lesson 14-1, page 334

JOURNALIZING PAYMENT OF A PAYROLL 4 2 5 3 1 6 7 1. 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. Lesson 14-1, page 334

Complete 14-1 Work Together and On Your Own

Vocabulary Federal unemployment tax – a federal tax used for state and federal administrative expenses of the unemployment program. State unemployment tax- a state tax used to pay benefits to unemployed workers.

UNEMPLOYMENT TAXABLE EARNINGS 2 1 1 3 1. Enter accumulated earnings and total earnings for each employee. 2. Enter unemployment taxable earnings. 3. Total the unemployment taxable earnings column. Lesson 14-2, page 337

UNEMPLOYMENT TAXES         Calculate Unemployment Taxes—Federal     Unemployment Federal Federal Taxable Unemployment Unemployment Earnings  Tax Rate = Tax $183.75  0.8% = $1.47 Calculate Unemployment Taxes—State     Unemployment State State Taxable Unemployment Unemployment Earnings  Tax Rate = Tax $183.75  5.4% = $9.92 Lesson 14-2, page 338

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 Classification Expense Liability Change Increased Entered Debit side Credit side Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable normal balance normal balance normal balance  315.72  57.07  247.26 Unemployment Tax Payable—Federal Unemployment Tax Payable—State normal balance normal balance   1.47 9.92 Lesson 14-2, page 339

JOURNALIZING EMPLOYER PAYROLL TAXES 2 3 4 1 6 5 1. 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. Lesson 14-2, page 339

Complete 14-2 Work Together and On Your Own

EMPLOYER ANNUAL REPORT TO EMPLOYEES OF TAXES WITHHELD Lesson 14-3, page 341

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN 1. Heading 2. Number of Employees 1 3. Total Quarterly Earnings 4. Income Tax Withheld 5. Employee and Employer Social Security and Medicare Taxes 2 3 4 6. Social Security plus Medicare Taxes 5 6 7. Total Taxes 7 8. Total Taxes for Each Month 9. Total Taxes 8 9 Lesson 14-3, page 342

PREPARING EMPLOYER’S QUARTERLY FEDERAL TAX RETURN Calculate Social Security and Medicare Taxes     Total Earnings  Tax Rate = Tax Social Security $22,575.00  13% = $2,934.75 Medicare $22,575.00 3% = $ 677.25 Calculate Social Security and Medicare Taxes     Employee Employer Social Social Federal Income Security and Security and Federal Tax Tax Withheld + Medicare Tax + Medicare Tax = Liability 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 Lesson 14-3, page 343

EMPLOYER ANNUAL REPORTING OF PAYROLL TAXES Lesson 14-3, page 344

Complete 14-3 Work Together and On Your Own

Paying withholding and payroll taxes Frequency and method of payment is determined by the total amount of tax paid each year. If the total amount paid in the previous 4 quarters is $50,000 or less, a business is classified as a monthly scheduled depositor. A monthly scheduled depositor must pay the total amount due to an authorized financial institution by the 15th day of the following month with form 8109.

Exceptions 1. If less than $500 tax liability is accumulated during a three-month quarter, the deposit may be paid at the end of the month following the end of the quarter. 2. If a tax liability of $100,000.00 or more is accumulated on any day, the amount must be deposited on the next banking day.

Omni Import’s Classification Omni is classified as a monthly depositor. Payroll taxes are deposited with a local authorized financial institution by the 15th day of the following month accompanied by Form 8109.

FORM 8109, FEDERAL DEPOSIT COUPON Lesson 14-4, page 347

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. Accounts Affected Employee Inc. Tax Pay. Social Security Tax Pay. Medicare Tax Payable Cash Classification Liability Asset Change Decreased Entered Debit side Credit side Cash Medicare Tax Payable Social Security Tax Payable Employee Inc. Tax Payable normal balance normal balance normal balance  542.00  985.40  227.42 normal balance 1,754.82  Lesson 14-4 page 348

JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX 1 3 5 4 2 1. 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 348

PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX Lesson 14-4, page 349

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 Affected Unemployment Tax Payable—Federal Cash Classification Liability Asset Change Decreased Entered Debit side Credit side Unemployment Tax Payable—Federal Cash normal balance normal balance 8.40  8.40  Lesson 14-4, page 350

JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX 1 2 3 4 5 1. 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. Lesson 14-4, page 350

JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX 1 2 3 4 5 1. 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. Lesson 14-4, page 350

Complete 14-4 Work Together and On Your Own