LESSON 12-2 Determining Payroll Tax Withholding 4/20/2017 LESSON 12-2 Determining Payroll Tax Withholding

Determining Payroll Tax Withholding Payroll taxes– taxes based on the payroll of a business Business is required by law to withhold certain payroll taxes from employee salaries Payroll taxes are based of employee total earnings ACCURATE and DETAILED payroll records must be maintained Payroll taxes are a liability to the employer until paid to the government

Employee Income Tax Federal income tax must be withheld from employee earnings Some require state, city or county income taxes as well Taxes are forwarded to the government periodically

Withholding allowance certificate Read p. 346 Withholding allowance: deduction from total earnings for each person legally supported by a taxpayer, including the employee Employers must have W-4 on file Tax withheld is based on the employee’s marital status and number of allowances Read FYI p. 346

EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE page 346 3 2 1 4 5 1. Write the employee’s name and address 2. 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

EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONS page 348 1 2 3 1. Select the appropriate table. 2. Locate the employee’s total earnings. 3. Intersection of wages and number of allowances column. LESSON 12-2

Examples on Reading Charts Take out a piece of paper Single, paid semimonthly, TE=$1050.00 Married, paid semimonthly, TE= $1050.00

Employee Social Security and Medicare Read p. 349 SS = federal tax for old age, survivors, and disability insurance Medicare- federal tax paid or hospital insurance Accounted for and reported separately Paid by both the Employee and Employer Employees withhold and deposit employee and contribution and then they match it

Social Security Calculated on Employee earnings up to a maximum paid in a calendar year Tax base= maximum amount of earnings on which tax is calculated Congress sets tax rate and base for SS 6.2% max $87,000 in a calendar year

Medicare No tax base 1.45% FYI p. 349 Practice WT/ OYO

TERMS REVIEW payroll taxes withholding allowance social security tax page 350 payroll taxes withholding allowance social security tax Medicare tax tax base LESSON 12-2

Review Quiz What is payroll? How many hours were worked if employee arrived at 8:29 and departed at 12:02? How is overtime calculated in this text? What is the % for Social Security and Medicare? Is there a tax base? Where does an employer get the information used to determine the amount of federal income tax withheld? Federal income tax withholdings are based on what two factors? Who pays SS tax and Medicare tax -- Employee or employer?