payroll fundamentals presentation

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Payroll FundamentalsPart 2For audio, dial 800-377-0237 access code 4114422

Presenter

Debbie Mathewson, CPP, CTT+Senior Learning [email protected] x4422

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Housekeeping Tips

Questions

‒ Incoming audio in “mute” mode

‒ Use the Q&A feature to submit questions

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Session Materials

PrintOpen soft copy or print pages 41 through 56

Session Handouts

Handouts needed for class: Payroll Fundamentals Book 2014.pdf

– Print

2014 IRS Publication 15

– Download – have open in a separate window

Interactive Tools

Feedback feature

Polling feature

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Objectives

Calculate Social Security & Medicare Taxes

Determine what compensation is taxable

Calculate employee wages from gross to net

Explain Federal tax depositing and filing requirementsrequirements

Workbook Page 2

Part 1 Review

Answer the following polls…

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Social Security & Medicare

Social Security wage limit for 2014:

$117,000

Social Security rate:

6.2%6.2%

Medicare Tax rate:

1.45%

Workbook Page 16

Payroll Deductions Practice

Page 16 - Example 1:

Mike is paid $900 in federal taxable wages every two

weeks, is married and claims 2 withholding

allowances. Using the wage bracket method for

federal income tax withholding calculate Mike’s netfederal income tax withholding, calculate Mike’s net

pay.

Taxable biweekly wages: $ 900.00


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Example 1:

Mike is paid $900 in federal taxable wages every two weeks, is married and claims 2 withholding allowances. Using the wage bracket method for federal income tax withholding, calculate Mike’s net pay.

Taxable biweekly wages: $ 900.00

Federal income tax withheld: $ -28.00

Social security tax withheld: $ -55.80

Medicare tax withheld: $ -13.05

Net pay: $ 803.15



Sue earns an annual salary of $62,000, is paid

weekly and on her W-4, she claims single with two

withholding allowances. Using the percentage

method for federal income tax withholding calculatemethod for federal income tax withholding, calculate

the net pay of her weekly paycheck.

Taxable weekly wages: $1,192.31 ($62,000 ÷ 52

weeks)

Percentage Method Practice

$76.00 x two withholding allowances = $152.00$1,192.31 - $152.00 (2 withholding allowances)= $1,040.31 (subject wages)

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Percentage Method Practice

$1,040.31 - $753 = $287.31 X 25% = $71.83 + $97.75 = $169.58



Sue earns an annual salary of $62,000, is paid weekly and on her W-4, she claims single with two withholding allowances. Using the percentage method for federal income tax withholding, calculate the net pay of her weekly paycheck.

T bl kl $1 192 31 ($62 000 ÷ 52 k )Taxable weekly wages: $1,192.31 ($62,000 ÷ 52 weeks)

Federal income tax withheld: $ - 169.58

Social security tax withheld: $ - 73.92

Medicare tax withheld: $ - 17.29

Net pay: $ 931.52

Calculation Practice

Work on Practice Question #1 on Page 17

– Change your feedback color to purple when you’re done.

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Calculation Practice - Answer

1. 48 hours x $15.48 = $743.048 hours x $15.48 x .5 = $61.92$743.04 + $61.92 = $804.96 (Gross Pay)

2. Federal Income Tax Withheld = $56Wage Bracket (page 49 of IRS Publication 15)Weekly/Married/2 withholding allowancesWeekly/Married/2 withholding allowances

3. $804.96 x 6.2% = $49.91 (Social Security Tax)4. $804.96 x 1.45% = $11.67 (Medicare Tax)5. $804.96 x 2.25% = $18.11 (State Income Tax)6. $804.96 x 1.0% = $8.05 (City Income Tax)7. Line 1 – (Lines 2 through 6) = $661.22

Taxable Compensation

Determining Taxable Compensation Taxable Fringe Benefits

– Personal use of a company car

– Gift certificates

Company paid vacation– Company paid vacation

– Amount of benefit defined as its Fair Market Value

– What it would cost an individual in an Arm’s Length Transaction

– When added to an employee’s earnings, it’s known as Imputed Income

Workbook Page 18


Determining Taxable Compensation

Imputed Income

Group Term Life Insurance

– Taxable in excess of $50,000

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Determining Taxable CompensationNontaxable Fringe Benefits

– Working condition fringe benefits

– Certain moving expenses

– Qualified employee discounts

– De minimis fringes

– Dues and membership fees

– On-premises athletic facilities


Example on page 19 – John

Regular Wages $2,500Imputed Income $1,800Total Taxable Wages $4,300

After the taxes are calculated on the total taxableAfter the taxes are calculated on the total taxable

wages, what will happen to the imputed income

amount?

It will be subtracted before his net pay is calculated.


Determining Taxable CompensationVoluntary Deductions

Pretax Deductions

For Health, Life, and Disability Insurance

– Deferred Compensation Plans

401(k) Contribution limit for 2014 = $17,500

Catch-up Provision allows for an additional $5,500

– Cafeteria Plans

Allow employees to select from two or more benefits

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Work on Practice Question #2 on Pages 21-22

– Change your feedback color to green when you’re done.


Calculation Practice #2 - Answer

Tom’s Federal Taxable Wages (Page 21 Line #3)

1. $5,192.31

2. $ 467.31

3. $5,192.31 - $467.31(401k) - $200(pretax health insurance +$2,475 (car lease value) =$ , ( )

$7,000.00 (Federal Taxable Wages)


Federal Income Tax Withheld – Page 41 of the IRS Publication 15

$151.90 x four withholding allowances = $607.60$7,000 - $607.60 = $6,392.40

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Federal Income Tax Withheld – Page 43 of the IRS Publication 15


$6,392.40 - $6,050 = $342.40 X 28% = $95.87 + $1,112.55 = $1,208.42


Tom’s Net Pay

1. $5,192.31

2. $ 467.31

3. $7,000.00

4. $1,208.42

5. $ 245.00 ($7,000 x 3.5%)

6. None

7. $ 0

8. $7,467.31 ($5,192.31 - $200 + $2,475)

9. $ 108.28 ($7,467.31 x 1.45%)

10. Net Pay - $2,963.30

Biweekly salary $5,192.31

Imputed car value + $2,475.00

Gross earnings = $7,667.31

FIT - $1,208.42

SIT - $ 245.00

Social Security - $ 0


y $

Medicare - $ 108.28

Health Insurance - $ 200.00

401(k) contribution - $ 467.31

Imputed car value - $2,475.00

= $2,963.30

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Depositing & Reporting Taxes

Principle of Constructive Receipt

Check Date

Federal Tax Deposit Rules

Two deposit frequencies are monthly and

semiweeklysemiweekly

Frequency based on a lookback period

Workbook Page 23

Lookback Period


Example:

– For tax year 2014, the lookback period is:

– July 1, 2012 through June 30, 2013

Employer’s 941 Liability $50,000 or less:

– Deposit frequency will be monthly

Employer’s 941 Liability greater than $50,000:

– Deposit frequency will be semiweekly

Workbook Page 23

Big Time Java’s 2014 Lookback Liability – Pg. 24

Lookback Period

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Big Time Java’s 2014 Deposit Frequency – Pg. 24

Lookback Period

Lookback Period

Example – Big Time Java, Inc.

2014 Lookback Period

3Q12 Liability - $13,000




Total Liability - $54,000

What is Big Time Java’s assigned deposit frequency for 2014?

Semiweekly

Workbook Page 24



Next Day Deposit Rule

– If an employer’s tax liability reaches $100,000,

Must be deposited by next banking day

F d l D it D D tFederal Deposit Due Dates

Workbook Page 24

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Deposit Frequency

Check Date Cutoff Date Due Date

Monthly

Semiweekly


Semiweekly

Next Day

Deposit Frequency


Monthly 1st through the 31st

Semiweekly


Semiweekly

Next Day

Deposit Frequency



Last day of the month

Semiweekly


Semiweekly

Next Day

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Deposit Frequency




15th of the following month


Semiweekly

Next Day

Deposit Frequency






Semiweekly Saturday through Tuesday

Next Day

Deposit Frequency







Tuesday

Next Day

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Deposit Frequency







Tuesday 3 banking days following cutoff date –usually Friday

Next Day

Deposit Frequency








Wednesday through Friday

Next Day

Deposit Frequency









Friday

Next Day

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Deposit Frequency









Friday 3 banking days following cutoff –usually Wednesday

Next Day

Deposit Frequency










Next Day Any date

Deposit Frequency










Next Day Any date Same as check date

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Deposit Frequency










Next Day Any date Same as check date

Next banking day

Federal Tax Deposit Calendar

www.adp.comInsights & Resources > Tools & Resources > Compliance Resources > Calendars


Example 1 – Bob’s Car Repair – Monthly

Depositor

Sept. 5 Liability - $15,000


Sept 19 Liability $15 000 Sept. 19 Liability - $15,000


Total Liability for September - $60,000

When will this liability be due? – October 15

Workbook Page 25

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Example 2 – Gina’s Hair Salon – Semiweekly

Depositor

Friday, May 23 Liability - $53,000

When will this liability be due?

Workbook Page 25


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Impact of One-Day Rule on Monthly Depositors

$100k liability in a month results in a change to

a semiweekly frequency

Workbook Page 25


Example 3 – John’s Hardware Store – Monthly

Depositor

Friday, September 12 Liability - $103,200

When will this liability be due?

Workbook Page 25


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Quarter Quarter Ends 941 Due Date

Jan. – Mar. March 31


Apr. – June June 30

July – Sept. September 30

Oct. – Dec. December 31

Workbook Page 25


Jan. – Mar. March 31 April 30


Apr. – June June 30



Workbook Page 25




Apr. – June June 30 July 31



Workbook Page 25

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July – Sept. September 30 October 31


Workbook Page 25





July – Sept. September 30 October 31

Oct. – Dec. December 31 January 31

Workbook Page 25


Form 944

Filed Annually

For employers whose annual liability is less

than:$1,000

Workbook Page 26

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Federal Unemployment Insurance (FUTA)

Paid by employers

FUTA Tax Rate is: 6.0% on the first $7,000 per employeeCan receive a credit of 5.4%Referred to as the tentative credit

Wh dit i li d FUTA t i 0 6%When credit is applied, FUTA rate is 0.6%

Credit ReductionFor employers in states who cannot pay back a federal

loan IRS announces credit reductions states after November

10 each year

Workbook Page 26

Federal Unemployment Insurance (FUTA)

Depositing and Paying FUTA If quarterly FUTA liability is less than $500, then

liability carries to next quarter

Reporting FUTA TaxR t d ll F 940Reported annually on Form 940

Workbook Page 26

Tax Deposit Practice

Page 27 of the workbook

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Thank [email protected]

909-592-6411 x4422

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payroll fundamentals presentation

Education

withholding allowances

federal tax depositing

medicare tax withheld

social security tax

federal taxable wages

medicare tax rate

taxable weekly wages

mikes net pay