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Chapter 14

Chapter 14. Payroll Accounting, Taxes and Reports. 14.1. Recording a Payroll. 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.

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Chapter 14

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  1. 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: • Social security tax • Medicare tax • Federal Unemployment Tax • State unemployment Tax • Payroll taxes are expense based on % of employee earnings

  6. Employee Employer

  7. Employer Taxes • Employer owes same in Social Security and Medicare as employees • Employer SS + Employee SS =Total SS 6.5% 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

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