LESSON 13-2LESSON 13-2

Recording Employer Payroll Taxes

PAYMENT OF TAXES TO PAYMENT OF TAXES TO GOVERNMENTGOVERNMENT

Two Types of Taxes paid1. Salary Taxes and Deductions

Taxes & deductions you make on employee’s behalf – employee really is paying, business collects and sends to the government for employee.

2. Payroll Taxes: taxes the business owes Four taxes employers owe to government?

Social Security Tax Medicare Tax Federal Unemployment tax State Unemployment tax

Federal Income, Social Security, and Medicare Taxes

Health, Bonds, and United Way

UNEMPLOYMENT TAXUNEMPLOYMENT TAX

Social Security Tax: Fund for elderly, survivors, or disabled 6.2% of employee’s gross earnings (match)

Medicare Tax Medical coverage for the elderly age 65 or older 1.45 of employee’s gross earnings (match)

UNEMPLOYMENT TAXUNEMPLOYMENT TAX

Unemployment tax Paid by business (not employees) Required per Federal Unemployment Insurance laws Pays workers benefits for limited periods of unemployment

Two steps to figure unemployment tax1. Determine the Unemployment taxable earnings amount

Only the first $7000 of total earnings are subject to tax

2. Calculate two types of Unemployment tax for all employees Federal Unemployment tax = .8% of earnings up to $7000 (accumulated)

State Unemployment tax = 5.4% of earnings up to $7000 (accumulated)

UNEMPLOYMENT TAXABLE EARNINGSUNEMPLOYMENT TAXABLE EARNINGS

1. Enter accumulated earnings from Previous Pay Period

2. Enter total earnings for this pay period

3. Determine amount of Unemployment Taxable Earnings

4. Total the Unemployment Taxable Earnings For all Employees.

          EARINGS RECORD FOR QUARTER ENDED December 31, 2010    

Employee No: 3   Selby   Rick   EMARITAL STATUS M

Withholding Allowances 4

        LAST NAME   FIRST NAME MIDDLE          

Rate of Pay 12.00  Social Security Number:   450-70-6432

Position      Sales Clerk    

                           

Pay Period Earnings DeductionsNet Pay

AccumulatedEarnings

  Ended RegularOvertim

e TotalFederal 

Income TaxSoc. Sec. 

Tax

Medicare 

TaxHealth 

Insurance Other Total

       18,432.00 

  10/15/2009 960.00 90.001050.0

0 20.00 65.10 15.23 60.00B        20.00 

           180.33 

         869.67 

       19,482.00 

  10/31/2009 1152.00  1152.0

0 30.00 71.42 16.70 60.00          20.00 

           198.12 

         953.88 

       20,634.00 

  11/15/2009 1056.00  1056.0

0 20.00 65.47 15.31 60.00          20.00 

           180.78 

         875.22 

       21,690.00 

  11/30/2009 1056.00  1056.0

0 20.00 65.47 15.31 60.00          20.00 

           180.78 

         875.22 

       22,746.00 

  12/15/2009 1056.00 81.001137.0

0 28.00 70.49 16.49 60.00          20.00 

           194.98 

         942.02 

       23,883.00 

                            

QuarterlyTotals  

6

FederalUnemployment

Tax=

FederalUnemployment

Tax Rate×

UnemploymentTaxableEarnings

StateUnemployment

Tax=

StateUnemployment

Tax Rate×

UnemploymentTaxableEarnings

UNEMPLOYMENT TAXESUNEMPLOYMENT TAXES

$6.32=0.008×$790.00

$42.66=.054×$790.00

JOURNALIZING PROCESSJOURNALIZING PROCESS

1. Record & Pay Employee Payroll Taxes (Lesson 1) Pay taxes Employee owes = Salary Expense

2. Record Business/Employer Payroll Taxes Pay Taxes the Employer Owes = Payroll Tax Expense (Dr) Social Security 6.2% - What account? (CR) Medicare 1.45% - What Account? (CR) Federal Unemployment .8% - What Account? (Cr) State Unemployment 5.4% - What Account? (Cr)

Are we paying these right now or later?

What journal will we use?

No Cash Payment, therefore must use the general journal

TAXES TOGETHERTAXES TOGETHER

Payroll Tax Expense = taxes the business owes Does Payroll Tax Expense increase as a Debit or Credit? How much is each payroll tax?

Payroll Tax Exp. Social Security Tax Pay: Medicare Tax Pay: Federal Unemployment tax Pay: State Unemployment tax Pay :

485.92

354.11

82.83

6.32

42.66

Debit

Federal Unemployment tax: 6.32

State Unemployment tax: 42.66

9JOURNALIZING EMPLOYER JOURNALIZING EMPLOYER PAYROLL TAXESPAYROLL TAXES

December 15. Recorded (not paid) 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.

Journalize Transaction: What Journal will you use?

JOURNALIZING EMPLOYER JOURNALIZING EMPLOYER PAYROLL TAXESPAYROLL TAXES

10

1122

33

55

44

66

4. Enter the debit amount.

1. Enter the date.

5. Enter each payable account

2. Enter expense account debited.

6. Enter the credit amounts.

3. Enter the memorandum number.

General Journal Page #  

Date Account Title Doc No.

Post. Ref Debit Credit

         

                             

                             

                             

                             

                             

                             

                             

December 15th Memorandum 63

Total Payroll Exp:

Social Security Tax: $354.11

Medicare Tax: 82.83

Federal Unemployment tax: 6.32

State Unemployment tax: 42.66

TERMS REVIEWTERMS REVIEW

federal unemployment tax state unemployment tax

11

REVIEWREVIEW

WTG 13-2

13

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Calculate the Tax Amounts:

Total Payroll Exp:

Social Security Tax:

Medicare Tax: Federal

Unemployment tax: State Unemployment tax:

7070

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