Section 2Employer’s Payroll Taxes What You’ll Learn  How to calculate the employer’s FICA taxes.  How to calculate federal and state unemployment taxes.

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Presentation transcript:

Section 2Employer’s Payroll Taxes What You’ll Learn  How to calculate the employer’s FICA taxes.  How to calculate federal and state unemployment taxes.  How to journalize and post employer’s payroll taxes. What You’ll Learn  How to calculate the employer’s FICA taxes.  How to calculate federal and state unemployment taxes.  How to journalize and post employer’s payroll taxes.

Why It’s Important In addition to the amounts withheld from employees’ payroll checks, the employer owes taxes based on the weekly payroll. These taxes are liabilities of the business. Why It’s Important In addition to the amounts withheld from employees’ payroll checks, the employer owes taxes based on the weekly payroll. These taxes are liabilities of the business. Section 2Employer’s Payroll Taxes (cont'd.) Key Terms  Federal Unemployment Tax Act (FUTA)  State Unemployment Tax Act (SUTA)  Payroll Tax Expense Key Terms  Federal Unemployment Tax Act (FUTA)  State Unemployment Tax Act (SUTA)  Payroll Tax Expense

The Employer’s FICA Taxes  The current rates are 6.2% for social security tax and 1.45% for Medicare tax.  The employer and the employee pay social security tax on gross earnings up to the maximum taxable limit per employee.  The employer and the employee pay Medicare tax on all gross earnings; there is no maximum taxable limit.  The current rates are 6.2% for social security tax and 1.45% for Medicare tax.  The employer and the employee pay social security tax on gross earnings up to the maximum taxable limit per employee.  The employer and the employee pay Medicare tax on all gross earnings; there is no maximum taxable limit. Section 2Employer’s Payroll Taxes (cont'd.)

Federal and State Unemployment Taxes  The Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA) require employers to pay unemployment taxes.  The employer pays both federal and state unemployment taxes.  The maximum federal unemployment tax is 6.2% on the first $7,000 of an employee’s annual wages.  State unemployment tax rates and maximum taxable amounts vary among states.  The Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA) require employers to pay unemployment taxes.  The employer pays both federal and state unemployment taxes.  The maximum federal unemployment tax is 6.2% on the first $7,000 of an employee’s annual wages.  State unemployment tax rates and maximum taxable amounts vary among states. Section 2Employer’s Payroll Taxes (cont'd.)

Journalizing the Employer’s Payroll Taxes  The employer’s payroll taxes are business expenses recorded in the Payroll Tax Expense account.  Use the Social Security Tax Payable and the Medicare Tax Payable accounts to record both the employees’ and the employer’s FICA taxes.  Record the employer’s unemployment taxes in the Federal Unemployment Tax Payable and State Unemployment Tax Payable accounts.  The employer’s payroll taxes are business expenses recorded in the Payroll Tax Expense account.  Use the Social Security Tax Payable and the Medicare Tax Payable accounts to record both the employees’ and the employer’s FICA taxes.  Record the employer’s unemployment taxes in the Federal Unemployment Tax Payable and State Unemployment Tax Payable accounts. Section 2Employer’s Payroll Taxes (cont'd.)

Journalizing the Employer’s Payroll Taxes (cont'd.) JOURNAL ENTRY

Check Your Understanding Explain why the employer’s payroll taxes are a liability of the business. Section 2Employer’s Payroll Taxes (cont'd.)