1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 13-2 Recording Employer Payroll Taxes Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. CENTURY 21 ACCOUNTING © Thomson/South-Western CALCULATING EMPLOYER PAYROLL TAXES Employers must pay to the government the taxes withheld from employee earnings. In addition, employers must pay several of their own payroll taxes. Employer payroll taxes are business expenses. Most employers must pay four separate payroll taxes: Employer social security tax Medicare tax Federal unemployment tax State unemployment tax 2 LESSON 13-2

3. CENTURY 21 ACCOUNTING © Thomson/South-Western UNEMPLOYMENT TAXABLE EARNINGS Most employers are required to pay two types of unemployment tax A federal tax used for state & federal administrative expenses of the unemployment program is called federal unemployment tax A state tax used to pay benefits to unemployed workers is called state unemployment tax 3 LESSON 13-2 page 374

4. CENTURY 21 ACCOUNTING © Thomson/South-Western Federal Unemployment Taxes Federal unemployment insurance laws require that employers pay taxes for unemployment compensation The total earnings subject to unemployment tax is referred to as unemployment taxable earnings The unemployment tax is applied to the first $7,000 earned by each employee for each calendar year State Unemployment Taxes State Unemployment taxes vary from state to state Most states require employers to pay unemployment tax on the first $7,000 earned by each employee 4 LESSON 13-2

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 13-2 UNEMPLOYMENT TAXABLE EARNINGS 2 3 page 374 1 1.Enter accumulated earnings and total earnings for each employee. 2.Enter unemployment taxable earnings. 3.Total the Unemployment Taxable Earnings column.

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 13-2 Federal Unemployment Tax = Federal Unemployment Tax Rate × Unemployment Taxable Earnings State Unemployment Tax = State Unemployment Tax Rate × Unemployment Taxable Earnings UNEMPLOYMENT TAXES page 375 $6.32=0.8%×$790.00 $42.66=5.4%×$790.00

7. CENTURY 21 ACCOUNTING © Thomson/South-Western JOURNALIZING EMPLOYER PAYROLL TAXES Employer payroll taxes are paid to the government at a later date. The liability is incurred when salaries are paid The transaction to record employer payroll taxes expense is journalized on the same date the payroll is journalized 7 LESSON 13-2 page 376

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 13-2 JOURNALIZING EMPLOYER PAYROLL TAXES page 376 December 15. Recorded employer payroll taxes expense, $485.92, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $354.11; Medicare tax, $82.83; federal unemployment tax, $6.32; state employment tax, $42.66. Memorandum No. 63. (continued on next slide)

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 13-2 JOURNALIZING EMPLOYER PAYROLL TAXES 1 2 3 5 4 6 page 376 4. Write the debit amount.1. Write the date. 5. Write the titles of the liability accounts credited. 2. Write the title of the expense account debited. 6. Write the credit amounts.3. Write the memorandum number. (continued from previous slide)

10. CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 13-2 TERMS REVIEW federal unemployment tax state unemployment tax page 377