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Chapter 11 Payroll responsibilities within the accounting dept. Family Economics & Financial Education. The Payroll Department. Within the Accounting Department Employer has the responsibility to pay each employee a fair, non-discriminated salary

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Chapter 11 Payroll responsibilities within the accounting dept.

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Chapter 11 payroll responsibilities within the accounting dept

Chapter 11Payroll responsibilities withinthe accounting dept.

Family Economics & Financial Education

The payroll department

The Payroll Department

  • Within the Accounting Department

  • Employer has the responsibility to pay each employee a fair, non-discriminated salary

  • to find your worth, according to zipcode

  • Pay will vary according to Cost of Living

    • Real Estate prices and Taxes are the major variable

Payroll tax evasion video http www myfoxphilly com dpp money nifty fifties tax troubles 051612

Payroll Tax evasionVideo:

  • The five owners and managers of the Nifty Fifty's restaurant chain have been charged with cheating the IRS out of millions of dollars, the U.S. Attorney's office announced on Wednesday.

  • Robert Mattei, 73, of Delray Beach, Florida; Leo McGlynn, 52, of Swarthmore, Pa.; Brian Welsh, 48, of Springfield, Pa.; Joseph Donnelly, 49, of Springfield, Pa.; and Elena Ruiz, 46, of Drexel Hill, PA were charged in connection with an alleged tax evasion conspiracy.

  • U.S. Attorney Zane Memeger said the five cheated the Internal Revenue Service by failing to properly account for more than $15 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes.


The buffet rule

The Buffet Rule

  • Listen:


Payroll deductions

Payroll Deductions


Some departments within accounting

Some Departments within accounting

  • Auditing

  • Payroll

    • Benefits Administration: Medical and Retirement

  • Financial Reporting

  • Cost

  • Tax

  • AP/AR management

Accounting transactions

Accounting transactions

  • Salary

    • An Expense of doing business

    • Gross Pay

  • Salary Deductions (optional and required)

    • Must be electronically deducted before employee receives paycheck

    • Liabilities of doing business

    • Transactions:

      • All payables are Credited (deducted from the employee’s paycheck)

      • Employer “owes” this money to different agencies/companies

      • Net Pay – the amount the employee actually takes home after all deductions are made

The debits and credits

The Debits and Credits

  • Gross Salary Expense


  • All Payables (deductions)


  • Net Pay: Cash


What are payroll taxes

What are Payroll Taxes?

  • Taxes – Required charges imposed on US citizens by local, state, and federal governments

  • Used to provide public goods and services

    • Largest amount of taxes a person pays is on his/her income

What are some services in your community that are funded by tax dollars?



  • On average, approximately 40% of a person’s paycheck will be deducted due to taxes, benefits, and investment choices before they even receive a paycheck

  • Taxes- Required charges imposed on citizens by local, state, and federal governments


Provide public goods and services


What is an item or service that you use every day that is paid for by taxes?

  • Citizens pay many different types of taxes in many different ways

    • Income tax, sales tax, property tax

  • Largest amount of taxes is paid on income

Required tax deductions


  • Federal Income Tax

    • Based on how much you make

    • US gov’t has 6 brackets

  • State Income tax – flat rate based on state

  • Local Income tax – flat rate based on township

  • FICA (Social Security Tax) – 4.2%

    • For those retired after age 62.5 or legally disabled to work

  • Unemployment tax - .08%

    • Goes to those in your state that are unemployed

  • Medicare – 1.45%

    • Goes to those in our country who are uninsured, underinsured, or those retired that are eligible for gov’t aide

Federal income tax brackets

Federal Income TaxBrackets

  • 10% - $0 to $8,375

  • 15% - $8,375 to $34,000

  • 25% - $34,000 to $83,600

  • 28% - $83,600 to $174,400

  • 33% - $171,850 to $373,650

  • 35% - $373,650 and up

Taxes continued

Taxes continued

  • Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress for individuals and private businesses

Optional payroll deductions


  • Medical Benefits – health insurance

    • Employer responsibility to have a relationship with 1 or more health insurance companies

    • Offer benefits to your employees

    • Employer pays a %; the employee pays a % (premium)

    • More the employer pays, the greater expense BUT it could make the employer more desirable/loyalty

  • Retirement Planning –

    • Employer offers an investment firm to withdraw a % of paycheck and invest in the stock market or other investment tool

      • 401K (mutual funds or groups of stocks)

      • IRA (retirement account, with interest)

      • Money is UNTOUCHABLE until age 62.5 (penalty is 20% for early/partial withdrawal)

Largest investment firms that employers work with

Largest Investment firms THAT Employers work with

  • Vanguard and Fidelity

  • Employee meets with a Financial Advisor to discuss investment strategy and retirement goals at time of Hiring

  • Here is the Discussion:

    • How much should I invested each week from my Gross Pay?

    • What stocks/investments/401ks should I invest in?

    • What is my RISK tolerance?

    • How long do I plan to work for?

    • What age would I like to retire at?

    • How much $ do I want waiting for me when I retire so I live comfortably?

How are taxes paid

How are Taxes Paid?

  • By Workers

    • Through deductions made from your Gross Salary by your Employer – Income Taxes

  • By homeowners – Real Estate and School Taxes

  • By shoppers – Sales Tax

  • By businesses – their profit is taxed

Real estate taxes

Real Estate taxes

  • These taxes are separate and not deducted from one’s paycheck

  • This is owed once a year by homeowners – check sent to Local Government

  • Broken into 2:

    • Property – based on value of home

    • School – based on needs of school

Starting a new job

Starting a New Job

Form w 4

Form W-4

Employee’s Withholding Allowance Certificate

  • Determines the percentage of gross pay which will be withheld for taxes

  • Allowances

    • Used to determine the amount of federal taxes withheld from the paycheck

    • Dependents lower your taxes!

      • Dependent – a person who relies on the taxpayer for financial support

  • Form i 9

    Form I-9

    Employment Eligibility Verification Form

    • Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States

    • Must provide documentation which establishes identity and employment eligibility

      • Examples include driver’s license, passport, Social Security card, and birth certificate

    Form i 9 employment eligibility verification form

    Form I-9Employment Eligibility Verification Form

    Verifies the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States

    Methods for paying employees

    Methods for paying employees

    • Live Check

    • Direct Deposit

    Reading a paycheck

    Reading a Paycheck

    Family Economics & Financial Education

    Why is it important to read your paycheck stub?

    Paycheck stub

    Paycheck Stub

    • Paycheck Stub

      • A document included each pay period which outlines paycheck deductions

    Personal information

    Personal Information

    • Personal Information

      • States the employee’s full name, address, and social security number

      • Always check to ensure this information is correct

    Pay period

    Pay Period

    • Pay Period

      • The length of time for which an employee’s wages are calculated; most are weekly, bi-weekly, twice a month, or monthly

      • The last day of the pay period is not always payday to allow a business to accurately compute wages

    Gross pay

    Gross Pay

    • Gross Pay

      • The total amount of money earned during a pay period before deductions

        • This is calculated by multiplying the number of hours worked by the hourly rate

        • If a person is on salary, it is the total salary amount divided by the specified time period

    Net pay

    Net Pay

    • Net Pay

      • The amount of money left after all deductions have been withheld from the gross pay earned in the pay period



    • Deductions

      • The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

    Year to date


    • Year-to-Date

    • Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub



    • Review the following concepts:

      • Form W-4

      • Form I-9

      • Reading a paycheck definitions

        • Net vs. gross pay

        • Required and Optional deductions



    • Calculating Payroll

    • Using Excel to calculate payroll and make deductions

      • Chapter 11 on website

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