1. Payroll Accounting, Taxes, and Reports
Chapter 14:
Payroll Accounting, Taxes, and Reports

2. Different Forms of Payroll Info
Payroll info for each pay period is recorded in the payroll register
Journal entries are made to record the payment of the payroll and the employer payroll taxes
Various quarterly and annual payroll tax reports are required to report the payment of payroll taxes

3. 14.1 Recording a Payroll
Payroll Register: The payroll journal entry is based on the totals in the Earnings column, each deduction column and the Net Pay column

4. Analyzing Payment of Payroll
Earning Total- is the Salary Expense and will be debited
Credit: Employee Income Tax, Soc Sec Tax, Medicare Tax, Health Ins Premium Tax, US Savings Bonds, United Way Donations, etc (ie: CREDIT EACH DEDUCTION) AND Cash (cash credit will equal net pay amount)

5. Journalizing Payment of a Payroll
Date, Title of Accounts affected
Debit: Salary Expense
Credit: Cash and Deduction Payable Accounts
***Total Earnings is the debit amount for Salary Exp
*** Net Pay is the credit amount for Cash

6. 14.1 Review: p. 343 Audit Your Understanding #1-4 Work Together #5-6
On Your Own #7-8

7. 14.2 Recording Employer Payroll Taxes
Employers must pay to the government all taxes withheld from employee pay checks
This includes: federal income tax, social security tax, and Medicare taxes
The are liabilities until they are paid to the government
Most employers pay 4 separate taxes of their OWN: employer social security tax, Medicare tax, federal unemployment tax and state unemployment tax
These amounts based on a % of employee earnings

8. Calculating
Social Security and Medicare are paid by BOTH employer and employee
Employer must pay the same amount withheld from employees
For example: For pay period ending December 15 Omni withheld $ in SS tax and $57.07 in Medicare tax from employees. Omni must pay these amounts as well

9. Unemployment Taxable Earnings
Laws require that employers pay taxes for unemployment compensation
These funds are used to pay workers benefits for limited periods of unemployment and to administer unemployment compensation
Unemployment tax is applied to the first $7,000 earned by an employee EACH calendar year

10. Unemployment
For each employee, enter accumulated earnings as of previous pay period.
Enter earnings from current pay period
Enter unemployment taxable earnings for pay period if accumulated earnings are LESS than $
Total Unemployment Taxable Earnings

11. Unemployment Taxes
Federal: tax rate is 6.2% of first $7,000 of employee’s earnings less state deducted % (no more than 5.4%)
Unemployment Taxable Earnings * Federal Unemployment Tax Rate (0.8% for most states)= Federal Unemployment Tax
State: Most states require 5.4% to be paid on first $7,000.
Unemployment Taxable Earnings * State Unemployment Tax Rate(5.4%)= State Unemployment Tax

12. Journalizing
December 15. Recorded employer payroll taxes expense, $315.72, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $247.26; Medicare tax, $57.07; federal unemployment tax, $1.47; state unemployment tax $9.92. Memorandum No. 63
Date
Payroll Taxes Expense Debit; Credit Liability Accounts: SS Tax, Medicare Tax, Unemployment Tax- Federal, Unemployment Tax- State

13. 14.2 Review: p. 348 Terms Review Audit Your Understanding #1-2
Work Together #3-5
On Your Own #6-8

14. 14.3 Reporting Withholding and Payroll Taxes
Each employer who withholds income tax, ss tax, and Medicare tax from employee earnings must furnish an annual report
This report is Internal Revenue Service Form W-2 and are given to each employee by January 31 of the next year
Four copies are given to the employee

15. Employer’s Quarterly Tax Return (p350)
Employers are required to periodically report payroll taxes withheld
Some quarterly and some annually
Quarterly Federal Tax Return
Shows federal tax, SS tax and Medicare taxes
Form 941
Filed before the last day of the month following end of calendar quarter

16. Employer Annual Reporting of Payroll Taxes
Form W-3: Transmittal of Wage and Tax Statements
Sent to Social Security Administration by February 28 of each year
Reports the previous year’s earnings and all payroll taxes withheld for all employees
Copy A of each W2 is attached
If number of employees is >250, the employer must send this info via computer files to the IRS

17. 14.3 Review p. 353 Audit Your Understanding #1-2 Work Together #3
On Your Own #4

18. 14.4 Paying Withholding and Payroll Taxes
Employers must pay to the federal, state, and local governments all payroll taxes withheld
Frequency determined by amount owed
If taxes for previous 4 quarters is $50,000 or less, employers are a monthly depositor and must pay by the 15th of the following month with form 8109
Two Exceptions: (1) less than $500 tax liability is accumulated in a quarter-employer can the end of that quarter; (2) tax liability is >$100,000 is accumulated on any day, amount must be deposited on the next banking day
Form 941

19. Journalizing
January 15. Paid cash for liability for employee income tax, $542.00; social security tax, $985.40; and Medicare tax, $227.42; total, $1, Check No 330
Date, Debit- each tax account (General Debit), Credit-Cash

20. Federal Unemployment Tax
Paid at the end of the month following each quarter if liability amount is <$100.
Uses Form 8109 also
Type of tax is 940

21. Journalizing
January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $ Check No. 343
Unemployment Tax Payable (Federal)-Debit, Cash-Credit
January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $ Check No. 344
Unemployment Tax Payable (State)- Debit, Cash Credit

22. 14.4 Review: p. 359 Audit Your Understanding #1-2 Work Together #3-4
On Your Own #5-6

23. Chapter 14 Review
Application Problems