0 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Analyzing and Journalizing the Payroll After payroll checks are written, the payment must be recorded in the accounting records. Employee earnings are an operating expense and are often recorded in the Salaries Expense account. There are various deductions withheld by the employer but not immediately paid. These amounts are business liabilities and are recorded in separate accounts. Journalizing and Posting the Payroll SECTION 13.1

1 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Analyzing and Journalizing the Payroll Each type of payroll liability is recorded in a separate account. Journalizing and Posting the Payroll SECTION 13.1

2 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing and Posting the Payroll SECTION 13.1

3 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing and Posting the Payroll SECTION 13.1

4 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing and Posting the Payroll SECTION 13.1

5 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Computing Payroll Tax Expenses An employer must pay taxes on employees’ wages. These taxes include:  the employer’s FICA taxes  the federal unemployment tax  the state unemployment tax Employer’s Payroll Taxes SECTION 13.2

6 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Employer’s FICA Taxes Both the employee and the employer pay FICA taxes. The current rates are 6.2% for social security tax and 1.45% for Medicare tax. The employee and employer pay these taxes whether the employee is full-time, part-time, temporary, or permanent. Employer’s Payroll Taxes SECTION 13.2

7 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Federal and State Unemployment Taxes There are two unemployment laws that require employers to pay unemployment taxes:  the Federal Unemployment Tax Act (FUTA)  the State Unemployment Tax Act (SUTA) Employees are required to pay unemployment taxes in some states. Employer’s Payroll Taxes SECTION 13.2

8 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing the Employer Payroll Taxes The payroll taxes are recorded as business expenses in the Payroll Tax Expense account. Employer’s Payroll Taxes SECTION 13.2

9 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Employer’s Payroll Taxes SECTION 13.2

10 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Payroll Taxes to the General Ledger This is an example of the individual ledger accounts after posting. Employer’s Payroll Taxes SECTION 13.2

11 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Employer’s Payroll Taxes SECTION 13.2

12 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Paying the Payroll Tax Liabilities Payroll liabilities are paid at regular intervals. Tax Liability Payments and Tax Reports SECTION 13.3

13 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. FICA and Federal Income Taxes A business makes a payment combining social security and Medicare taxes and employees’ federal taxes withheld. Form 8109 is sent with the payment to an authorized financial institution or Federal Reserve Bank. The Electronic Federal Tax Payment System (EFTPS) is used by larger businesses to make deposits. Tax Liability Payments and Tax Reports SECTION 13.3

14 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. FICA and Federal Income Taxes Businesses pay FICA and federal income taxes withheld at regular intervals. Tax Liability Payments and Tax Reports SECTION 13.3

15 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. FICA and Federal Income Taxes Tax Liability Payments and Tax Reports SECTION 13.3

16 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. State and Local Income Taxes Businesses pay state and local income taxes withheld at regular intervals. Tax Liability Payments and Tax Reports SECTION 13.3

17 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Federal Unemployment Taxes Most businesses pay the FUTA tax quarterly, unless it is less then $100 and only an annual payment is needed. Tax Liability Payments and Tax Reports SECTION 13.3

18 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Federal Unemployment Taxes Most businesses pay the FUTA tax quarterly, unless it is less then $100 and only an annual payment is needed. Tax Liability Payments and Tax Reports SECTION 13.3

19 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. State Unemployment Taxes State unemployment taxes are usually paid quarterly. Tax Liability Payments and Tax Reports SECTION 13.3

20 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Other Payroll Liabilities Payments for voluntary deductions are also made. Tax Liability Payments and Tax Reports SECTION 13.3

21 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting the Payment of Payroll Liabilities This is an example of the individual ledger accounts after posting. Tax Liability Payments and Tax Reports SECTION 13.3

22 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Tax Liability Payments and Tax Reports SECTION 13.3

23 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Tax Liability Payments and Tax Reports SECTION 13.3

24 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Preparing Payroll Tax Forms Employers complete a variety of payroll-related tax forms. Tax Liability Payments and Tax Reports SECTION 13.3

25 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Forms W-2 and W-3 Form W-2 is the Wage and Tax Statement and summarizes an employee’s earnings and withholdings for the calendar year. Form W-3 is the Transmittal of Wage and Tax Statements and summarizes the information from Forms W-2. Tax Liability Payments and Tax Reports SECTION 13.3

26 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Form W-2 Tax Liability Payments and Tax Reports SECTION 13.3

27 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Form W-3 Tax Liability Payments and Tax Reports SECTION 13.3

28 Glencoe Accounting Unit 3 Chapter 13 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Forms 941 and 940 Form 941 is the employer’s quarterly federal tax return and reports accumulated amounts of FICA and federal income taxes withheld from employees’ earnings and FICA taxes owed by the employer. Form 940 is used to report the employer’s federal unemployment tax. Tax Liability Payments and Tax Reports SECTION 13.3