1. Chapter 6 Payroll Accounting
EBD-301
Managing Money in an Entrepreneurial Venture

2. Payroll Accounting
If you have employees – you have payroll responsibilities IRS regulations are quite specific when it comes to payroll taxes and their timely remission The need to maintain absolutely accurate records is essential

3. Bookkeeping Requirements
Payroll Accounting
Bookkeeping Requirements
Journal Accounts
Wage and Salary Expense (when paid)
Accrued Wages and Salaries Payable (when owed but not yet paid)
Payroll taxes Payable (when taxes have not been remitted)
Income Taxes Payable (Federal, State, Local)

4. Payroll Accounting Payroll withholdings
Employee portion of Social Security tax
Employee portion of Medicare tax
Federal income tax
State income tax
Court-ordered withholdings
Other withholdings

5. Payroll Cost Accounts

6. Mandated Taxes on Income
Social Security FICA Tax (employer match)
2016: 6.2% of first $118,500
Medicare Tax (employer match)
2016: 1.45% on all income
Plus 0.9% surtax on certain incomes)
Federal Income Tax (importance of W-4 form)
Rate of taxation a function of status
State and Local Taxes
Typically a flat rate

7. Court Ordered Judgments Miscellaneous Withholdings
Other Withholdings
Court Ordered Judgments
Garnishment of wages to pay fines, etc.
Miscellaneous Withholdings
Union dues
Insurance premiums
Retirement fund contributions
Charitable contributions

8. Employer Payroll Related Expense
Employer portion of Social Security tax Employer portion of Medicare tax State unemployment tax Federal unemployment tax Worker compensation insurance Employer portion of insurance (health, dental, vision, life, disability) Employer paid holidays, vacations, and sick days Employer contributions toward 401(k), savings plans, & profit-sharing plans Post-retirement health insurance

9. State Unemployment Tax
100% of Federal and State Unemployment taxes are paid by employers Rates and amounts are based on amounts earned by each employee and historic experience

10. Worker compensation insurance
Worker compensation insurance provides coverage for employees who are injured on the job.
State law usually requires that employers carry this insurance.
Worker compensation insurance rates are a function of at least three variables:
the type of business or industry,
the type of job being performed, and
the employer's history of claims.

11. Employer Portion of Benefits
Insurance
Term Life
Health
Dental
Vision
Disability
Vacation and Holiday Pay, Sick Days
10 Federal Holidays
Amounts due based on length of service

12. Contributions to Retirement Plans
Defined Benefit Plans
Typically Insurance annuities fully funded by employer
Defined Contribution Plans 401(k), 403(b)
Employer and Employee bot contribute
Employer typically matches some portion of employee’s contribution

13. Sample Journal Entries

14. Sample Journal Entries

15. Sample Journal Entries

16. Self-employed Person’s FICA Tax Rate for 2016
The self-employed person’s FICA tax rate for 2016 is 15.3% on the first $118,500 of net income and then 2.9% on the net income that is in excess of $118,500.
Social Security: 12.4% of first $113,700
Medicare Tax: 2.90% of every dollar of income
0.9% surtax on income above $200,000 (single) or $250,000 (joint), $125,000 if filing separately.

17. Chapter Summary
Payroll accounting is relatively simple. Care should be exercised each calendar year as rates are subject to change. The timely remission of payroll taxes to the federal, state, and local taxing authorities is of primary importance. Late submissions will accrue interest and penalties. The Federal and State tax authorities have gone to electronic submission. Care must be taken to make certain the ID numbers are exactly correct.

18. Chapter 6 Homework
What are the IRS requirements for businesses with employees?
Which items (taxes) are subject to payroll withholding?
What is the importance of W-4 form; W-2 form?
Describe the employer portion of Payroll Taxes; those paid only by the employer.
Why must employers carry Worker Compensation Insurance?
The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________.
The amount that an employee "clears" or "takes home" is the __________ pay.