1. Payroll Accounting, Taxes, and Reports
Chapter 13

2. Do Now
If you owed money to your parents but had to wait to be paid by your part-time job employer:
Which party would represent the government for payroll purposes (your employer, you, or your parents)? Why?
If you had to choose three columns from the payroll register to make a journal entry, which would they be?
Which type of journal would you use to record payroll?

3. 13-1: Recording a Payroll
Payroll information for each pay period recorded in payroll register
Each pay period, payroll information for each employee recorded on employee earnings record
Provide all payroll information needed to prepare payroll and payroll tax reports
Journal entries made to record payment of payroll and employer payroll taxes

4. 13-1: Recording a Payroll
Column totals of payroll register provide debit and credit amounts needed to journalize a payroll
Based on total of Earnings Total column, each deduction column, and Net Pay column
Earnings total = “Salary Expense”
Deductions = Liability; “Payable”
Net Pay = Cash
Page 370 text reference

5. Exercises 13-1 WT: Text page 372, WP page 327
13-1 OYO: Text page 372, WP page 328

6. Reading Activity Read the following article and write down:
How often you’d want to be paid as employee…explain why
How often you’d like to pay employees as an employer…explain why

7. 13-2: Recording Employer Payroll Taxes
Amount of taxes withheld from employee earnings are liabilities of employers until they are paid to government
Employers must also pay their own taxes
Employer payroll taxes are business expenses

8. 13-2: Recording Employer Payroll Taxes
Employers pay 4 separate payroll taxes:
Employer social security tax
Medicare tax
Federal unemployment tax
State unemployment tax
Employer payroll taxes based on percentage of employee earnings

9. 13-2: Recording Employer Payroll Taxes
Social security and Medicare taxes are only payroll taxes paid by both employees and employer
Employers pay total of those columns in payroll register for the pay period
Congress sets social security and Medicare tax rates for employees and employers and may change tax rates and tax base
Social Security = 6.2% on maximum tax base of $87,000
Medicare = 1.45%, no tax base

10. 13-2: Recording Employer Payroll Taxes
Employers must pay taxes for unemployment compensation
Total earnings subject to unemployment tax is unemployment taxable earnings
Applied to first $7,000 earned by each employee for calendar year
Visual aid on text page 374

11. 13-2: Recording Employer Payroll Taxes
Federal unemployment tax: federal tax used for state and federal administrative expenses of the unemployment program
Usually 6.2% of first $7,000 earned by each employee
Can deduct amounts paid to state unemployment funds to a maximum of 5.4%
Results in 0.8% being the effective federal unemployment tax rate in most states on the first $7,000 earned by each employee
Unemployment taxable earnings used to calculate federal unemployment tax

12. 13-2: Recording Employer Payroll Taxes
Example:
Unemployment Taxable Earnings: $790.00
Federal Unemployment Tax Rate: 0.8%
$ X = $6.32
Federal Unemployment Tax = $6.32

13. 13-2: Recording Employer Payroll Taxes
State unemployment tax: state tax used to pay benefits to unemployed workers
5.4% on first $7,000 earned by each employee
Unemployment taxable earnings used to calculate federal unemployment tax are also used to calculate state unemployment tax

14. 13-2: Recording Employer Payroll Taxes
Example:
Unemployment Taxable Earnings: $790.00
State Unemployment Tax Rate: 5.4%
$ X = $42.66
Federal Unemployment Tax = $42.66

15. 13-2: Recording Employer Payroll Taxes
Transaction to record employer payroll taxes expense is journalized on same date payroll is journalized
Salary expense and employer payroll taxes expense both recorded in same accounting period

16. Exercises 13-2 WT: Text page 377, WP page 329
13-1 OYO: Text page 377, WP page 330