1. Employer Taxes, Payments, and Reports
Chapter 8
Employer Taxes, Payments, and Reports
We saw in the previous chapter how to compute and record payroll data as gross pay, employees' income tax withheld, employees' FICA taxes withheld, and various other deductions.

2. Yuk…Here comes some extra chapter 8 payroll terminology trivia
Now we will learn how to record the transactions to pay the payroll withholding liabilities as well as the taxes levied on the employer.
Every employer must have an EIN or Identification Number. It is a number assigned by the IRS to an employer.
The EIN is used by an employer when recording and paying payroll and income taxes. Form SS-4 is sent to the IRS and a business is then assigned an EIN.
Yuk…Here comes some extra chapter 8 payroll terminology trivia

3. (Accounting just gets funner and funner!)
Recording payroll and payroll taxes
Now, we get to learn how to journalize the employer’s share of the payroll taxes…
(Accounting just gets funner and funner!)
Just to get started, let’s look at the journal entry from our last chapter that shows us recording the Wages Expense part of payroll. 5

4. Here is how you journalize it…..
Record Wages Expense
Here is how you journalize it…..
Jan 15 Wages Expense Employees’ Federal Income Tax Payable
Employees’ State Income Tax Payable
FICA Taxes Payable (7.65%)
Employees’ United Way Payable
Wages Payable (Net pay)
As always, expenses are debited while liabilities are credited.
Net pay (AFTER deductions)
Gross pay (BEFORE deductions)

5. how to figure these taxes..
Remember, the employer has to pay some payroll taxes as well..
Calculating employer taxes for FICA Social Security, FICA Medicare, FUTA, SUTA, and workers’ compensation insurance
I don’t
remember
how to figure these taxes.. 5

6. Here is a quick reminder about the taxes the employer must pay…..
FICA, FUTA & SUTA Rates
Here is a quick reminder about the taxes the employer must pay…..
FICA- Social Sec % on the first $113,700
FICA- Medicare % (no annual wage limit)
FUTA % on the first $7,000
SUTA % (each state determines
wage base max.)
FICA old age and survivor’s disability insurance rate is 6.2% and applies to the first $113,700 of an employee’s earnings. FICA Medicare is 1.45% and applies to all earnings with no limit. FUTA is .6% and applies to the first $7,000 of earnings. SUTA is 5.4% and also applies to the first $7,000 of an employee’s earnings.

7. Remember, employers pay ½ of their employees FICA-Social Security and ½ of their FICA-Medicare taxes… They also pay ALL the Unemployment Taxes for their employees!
The journal entry to Record Payroll Tax Expense on $1,000 of gross wages would be:
Oct Payroll Tax Expense (Total all 4 taxes)
136.50
FICA Taxes Payable (6.2% %)
76.50
Federal Unemployment Tax Payable (.6%)
6.00
State Unemployment Tax Payable (5.4%)
54.00
(To record employer’s share of FICA taxes and employer’s state and federal unemployment taxes.)

8. Deposits can be submitted by computer or telephone.
Federal Income Tax withholdings and FICA taxes need to be deposited frequently…
The timing of when the deposits must be made depends on the amount of payroll
The IRS now requires all companies to make tax deposits electronically, using the Electronic Federal Tax Payment System (EFTPS).
Deposits can be submitted by computer or telephone.
There are substantial penalties for late deposits of federal taxes.
Semiweekly depositors must make regular deposits. A lot of employers pay employees twice a month or sometimes only once a month. FICA stands for Federal Insurance Contribution Act and it is part of the Social Security law that requires employees and employers to pay old-age, survivors, and disability insurance (OASDI). FUTA stands for Federal Unemployment Tax Act. It is a tax paid by employers to the federal government. The rate is .8% and it applies to the first $7,000 of earnings of each employee after normal FUTA tax credit is applied.

9. (I know this will be on the test…)
Employers journalize the payment of FIT and FICA taxes with the following entry…
Can you show me the journal entry that is made when the employer deposits the Federal inc. tax withheld and FICA taxes?
(I know this will be on the test…)
Oct 15
Employees’ Federal Income Tax Payable
FICA Taxes Payable
Cash
Issued ck. for federal tax deposit, Central Ntl. bank
Okay. Thanks!
From text

10. Reports and Payments of Federal Unemployment Tax

11. You can do it buddy! They’re easy squeezy lemon peezy!
We have seen examples of recording (1)Wages Expense and (2) Payroll Tax Expense (3) We have also seen the journal entry to deposit the 941 Taxes into the bank.
Now, let’s look at the journal entries to pay the SUTA, FUTA and Worker’s Compensation Insurance…
O.M.G!! I don’t think I can cram one more journal entry into my brain! HELP!!!
You can do it buddy! They’re easy squeezy lemon peezy! 5

12. Paying SUTA Tax (State Unemployment tax)
Paid to state government
Typically due by end of month following each calendar quarter
If employers make payments to state governments on time, they can receive a decrease on FUTA tax owed.

13. Record Payment of SUTA Tax
Apr 30
Issued ck. For payment of state unemployment tax of 5.4%
SUTA Payable will decrease along with cash once the journal entry is recorded.
From text

14. Paying FUTA Tax (federal unemployment tax)
If tax owed for calendar year < $500, employer electronically pays to the IRS by end of January of the next year
If amount owed > $500, employer pays quarterly due by the end of the month following the end of the calendar quarter
FUTA tax must be paid on time to avoid any penalties.

15. Record Payment of FUTA Tax
Apr 30
421.95
421.95
Issued check for payment of .6% Federal unempl. Tax
From text

16. Employer's Quarterly Federal Tax Return (Form 941)
The form is filed Quarterly by the employer
Completed after the end of each calendar quarter
Reports total FICA (Social security and Medicare) taxes owed plus amount of Federal income tax withheld from employee’s pay
Every three months, an employer must send this form to the IRS along with the appropriate payroll withholdings.

17. Form 941 (Partial) looks like this…..--
This is a sample Form 941 for An employer completes this form every quarter.

18. Wage Withholding Statements for Employees (Form W-2 and W-3)
Preparing these and Form 940 (unemployment taxes)
Hey buddy! There are only a total of four forms in this chapter! Get a grip!
Forms, forms and more forms…ARGH!!!

19. W-2: Wage and Tax Statement
Prepared by employer each calendar year
Provides summary of gross earnings and deductions to each employee
Copies:
Employee
IRS
Any state where employees’ income taxes have been withheld
Social Security Administration
Company records
Employees should receive their W-2s by January 31st. Employees need this form in order to complete their tax returns.

20. Sample W-2
The Form W-2 summarizes an employee’s wages for the entire year, as well as his or her withholdings.
This is what each employee gets at the end of the year. It shows total earnings and taxes withheld.

21. W-3: Transmittal of Income and Tax Statements
Completed by employer to verify the number of W-2’s and amounts withheld
Sent to a Social Security Administration data processing center along with copies of each employee’s W-2
The Form W-3 summarizes the total wages paid along with total withholdings.

22. Sample W-3
The form above answers all of the necessary questions the Social Security Administration will need to know, such as total W-2s, wages, FICA, and FIT withholdings.
This is what the employer sends along with all of the copies of the employees’ W-2s. This W-3 form shows only the TOTALS of all of the W-2’s

23. Federal Unemployment Tax Returns
IRS Form 940 must be filed annually
Prepared at end of calendar year
Reports the amount of unemployment tax due for the year (for Federal FUTA tax only)
Every year, an employer will complete a Form 940 to report the amount of unemployment tax due for the year.

24. Form 940 (Partial) --
Above is a sample Form 940.

25. Record Payment of Workers’ Compensation Insurance
That is right! All employers are required to pay these four taxes plus the Worker’s Compensation Insurance below…
3573
My boss pays FUTA?
3573
($1,000/$100 x insurance rate)
My boss also pays ½ my social security and medicare taxes?
Prepaid worker’s compensation insurance is an asset account much like prepaid rent.
My boss pays SUTA?