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

2. 14.1
Recording a Payroll

3. Payroll Register
Column totals of a payroll register provide the debit & credit amounts needed to journalize payroll
Total Earnings Column = Salary Exp Deb
Net Pay = Cash Credit
Pg. 333

4. 14.2 Recording Employer Payroll Taxes

5. Calculating Employer Payroll Taxes
Employers withhold:
Federal income tax
Social security tax
Medicare tax
Liabilities until actually paid to the gov’t
Employers must pay:
Federal Unemployment Tax
State unemployment Tax
Payroll taxes are expense based on % of employee earnings

6. Employee Employer Social Security Medicare Withholding Tax
Federal Unemployment Tax
State Unemployment Tax

7. Employer Taxes
Employer owes same in Social Security and Medicare as employees
Employer SS + Employee SS =Total SS
6.5% % 13%
Employer Med + Employee Med = Total M
1.5% 1.5% 3%

8. Federal Unemployment Tax
Used to pay administrative exp for unemp. program
0.8% of the first $7,000 earned (0.008)
State Unemployment
Used to pay benefits to workers
5.4% of first $7,000 earned (0.054
Employer payroll taxes are paid at later date – Liability is incurred when salaries are paid

9. 14.3 Reporting Withholding and Payroll Taxes

10. Employer Annual Report
W-2 furnished to employee from employer showing employee earnings and taxes withheld
W-2 must be furnished by Jan 31st
4 copies of W-2 are prepared for employees (A-D)
Copies B & C – Employee – B to IRS – C personal
Copy A – Social Security Admin
Copy D – Employer Copy

11. Preparing Employer’s Quarterly Federal Tax Return
Must periodically report payroll taxes withheld
Must file quarterly return showing federal income tax, social sec. and Med tax due
Submit Form 941by last day of month following the end of quarter

12. Employer Annual Reporting of Payroll Taxes
Form W3 – Transmittal of Income and Tax Statements
Sent to the SSA by Feb 28
Also Copy A of W-2
Employers with >250 employees file electronically

13. 14.4 Paying Withholding and Payroll Taxes

14. Paying the Liability for Payroll Taxes
When you pay depends on amount owed
Usually monthly
By 15th of following month
File with Form 8109 at local Financial Institution (Bank)

15. Journalizing Payment of Liability
Paying Taxes:
Debit Payables
Credit Cash

16. Paying Federal Unemp. Tax
Paid by the end of month following ¼
Fill out form and file like other taxes at bank
Debit Unemp. Payables
Credit Cash