PAYROLL LIABILITIES AND TAX RECORDS Chapter 13

Journalizing and Posting Payroll  Salaries Expense – The expense account used to record employees’ earnings  Involuntary Deductions:  Federal Income Tax (Federal Income Tax Payable)  State Income Tax (State Income Tax Payable)  Social Security Tax (Social Security Tax Payable)  Medicare Tax (Medicare Tax Payable)  13-1

Journalizing and Posting Payroll  Voluntary Deductions  U.S. Savings Bond Payable  Union Dues Payable  401(k) Payable  United Way Payable  Payables will be credited  What about when we pay them off?  13-5, 13-4

Employer’s Payroll taxes  FICA  Employer has to pay these too Social Security (6.2%) and Medicare (1.45%)  Federal Unemployment Tax Act (FUTA)  Maximum 6.2% on the first $7,000 earned  State Unemployment Tax Act (SUTA)  Deducted from federal, with a max at 5.4% Therefore state is often 5.4% and federal is.8%  13-2

Journalizing Payroll Tax Payroll Tax Expense A+B+C+D S.S. Tax PayA Medicare Tax PayB Fed Unemp Tax PayC State Unemp Tax PayD  13-5 Bonus  Now these payables have a credit balance  Debit them to pay them off (credit cash)

Payroll Tax Forms  W-2: Summarizes an employees earnings and withholdings for a calendar year  W-3: Transmittal of wage and tax statements  941: Employer’s quarterly tax return  940: Employer’s annual tax return