1. LESSON 12-2 Determining Payroll Tax Withholding
4/20/2017
LESSON 12-2
Determining Payroll Tax Withholding

2. Determining Payroll Tax Withholding
Payroll taxes– taxes based on the payroll of a business
Business is required by law to withhold certain payroll taxes from employee salaries
Payroll taxes are based of employee total earnings
ACCURATE and DETAILED payroll records must be maintained
Payroll taxes are a liability to the employer until paid to the government

3. Employee Income Tax
Federal income tax must be withheld from employee earnings
Some require state, city or county income taxes as well
Taxes are forwarded to the government periodically

4. Withholding allowance certificate
Read p. 346
Withholding allowance: deduction from total earnings for each person legally supported by a taxpayer, including the employee
Employers must have W-4 on file
Tax withheld is based on the employee’s marital status and number of allowances
Read FYI p. 346

5. EMPLOYEE’S WITHHOLDING ALLOWANCE CERTIFICATE
page 346 3 2 1 4 5
1. Write the employee’s name and address
2. Write the employee’s social security number.
3. Check the appropriate marital status block.
4. Write the total number of withholding allowances claimed.
5. The employee signs and dates the form.
LESSON 12-2

6. EMPLOYEE’S INCOME TAX WITHHOLDING – MARRIED PERSONS
page 348 1 2 3
1. Select the appropriate table.
2. Locate the employee’s total earnings.
3. Intersection of wages and number of allowances column.
LESSON 12-2

7. Examples on Reading Charts
Take out a piece of paper
Single, paid semimonthly, TE=$
Married, paid semimonthly, TE= $

8. Employee Social Security and Medicare
Read p. 349
SS = federal tax for old age, survivors, and disability insurance
Medicare- federal tax paid or hospital insurance
Accounted for and reported separately
Paid by both the Employee and Employer
Employees withhold and deposit employee and contribution and then they match it

9. Social Security
Calculated on Employee earnings up to a maximum paid in a calendar year
Tax base= maximum amount of earnings on which tax is calculated
Congress sets tax rate and base for SS
6.2% max $87,000 in a calendar year

10. Medicare
No tax base
1.45%
FYI p. 349
Practice WT/ OYO

11. TERMS REVIEW payroll taxes withholding allowance social security tax
page 350
payroll taxes
withholding allowance
social security tax
Medicare tax
tax base
LESSON 12-2

12. Review Quiz What is payroll?
How many hours were worked if employee arrived at 8:29 and departed at 12:02?
How is overtime calculated in this text?
What is the % for Social Security and Medicare? Is there a tax base?
Where does an employer get the information used to determine the amount of federal income tax withheld?
Federal income tax withholdings are based on what two factors?
Who pays SS tax and Medicare tax -- Employee or employer?