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Payroll Liabilities & Tax Records Chapter 13. Business Accounting. Payroll. affects all employees must be accurate and on-time includes many deductions needs to be journalized and posted money transferred to payroll account. Analyze and Journalize. Employees’ Earnings

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payroll
Payroll
  • affects all employees
  • must be accurate and on-time
  • includes many deductions
  • needs to be journalized and posted
  • money transferred to payroll account
analyze and journalize
Analyze and Journalize
  • Employees’ Earnings
    • Operating Expense
      • Salaries Expense
        • debit
  • Withholdings
    • Liabilities
      • Payables (taxes payable, ins. prem. payable, etc..)
        • credit
  • Net Pay
    • Lower Assets
      • Cash in Bank
        • credit
required withholdings
Required Withholdings
  • Employees’ Federal Income Tax Payable
  • Employees’ State Income Tax Payable
  • Social Security Tax Payable
  • Medicare Tax Payable
voluntary deductions
Voluntary Deductions
  • U.S. Savings Bonds Payable
  • Credit Union Payable
  • Union Dues Payable
  • United Way Payable
payroll journal entry
Payroll Journal Entry

Salaries Expense

Employees’ Federal Income Tax Payable

Employees’ State Income Tax Payable

Social Security Tax Payable

Medicare Tax Payable

U.S. Savings Bonds Payable

Credit Union Payable

Union Dues Payable

United Way Payable

401(k) Payable

Cash in Bank

employer s payroll taxes
Employer’s Payroll Taxes
  • Employers pay taxes too!
    • FICA
      • Social Security
      • Medicare
    • Unemployment Taxes
      • Federal
      • State
slide8
FICA
  • Federal Insurance Contribution Act of 1935
    • Social Security
      • income replacement in retirement
      • usually 6.2%
        • currently 4.2%
      • up to $110,100 for 2012
    • 1.45% for Medicare
      • provides medical insurance in retirement
unemployment taxes
Unemployment Taxes
  • provide funds to unemployed workers
  • Federal (FUTA)
    • up to 6.2% of first $7,000 of earnings
    • deduct up to 5.4% for state payments
      • therefore, usually 0.8% of $7,000 for federal
  • State (SUTA)
    • laws vary
journal entry
Journal Entry

Payroll Tax Expense

Social Security Tax Payable

Medicare Tax Payable

State Unemployment Taxes Payable

Federal Unemployment Taxes Payable

tax payments and reports
Tax Payments and Reports
  • paid at regular intervals
federal tax payments
Federal Tax Payments
  • one payment for federal taxes
    • Social Security, Medicare, and Federal Income
    • employee and employer
  • made at bank or through EFTPS
    • Electronic Federal Tax Payment System
federal tax payments con t
Federal Tax Payments (con’t)
  • usually by 15th of following month
    • twice a month for big businesses
  • with Form 8109
    • Federal Tax Deposit Coupon
state and local payments
State and Local Payments
  • at regular intervals
  • details differ by state / municipality
tax forms
Tax Forms
  • W-2
    • annual wage and tax statement
  • W-3
    • annual transmittal of W-2’s
  • 941
    • quarterly Federal Tax Return
  • 940
    • annual FUTA Tax Return
slide16
W-2
  • W-2
    • annual summary
      • each employee’s earnings and withholdings
        • gross earnings
        • federal withholdings
        • FICA withholdings
        • state and local withholdings
    • to employee by January 31st
    • copies sent to IRS, state, and local government
slide17
W-3
  • Transmittal of Wage and Tax Statements
    • sent with W-2’s
    • summary of all W-2 info
    • due by Feb 28