Unit D: Taxes and Spending

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Unit D Taxes and Spending

• 4.01 The effect of taxes on income

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Payroll Records

• Payroll Register
• form that summarizes information about employees
  earnings for each pay period.
• Why is a payroll register important?
• To comply with federal and state laws, payroll
  records must be kept accurately.

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Payroll Records

• Net Pay
• Amount left after total deductions are subtracted
  from gross earnings.
• Direct Deposit
• Employer deposits the employees check into
  personal banking account using electronic funds
  transfer.
• No payroll check is prepared.
• Employee receives a printed record of the payroll
  calculation.

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Payroll Records

• Employees Earnings Record
• Record containing all of the payroll information
  related to an employee.
• Accumulated Earnings
• Employees year-to-date gross earnings, or the
  employees gross earnings from the beginning of
  the year through the end of each pay period.

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Accumulated Earnings
Gross earnings Accumulated earnings
Accumulated Earnings for pay period for
previous for pay period just
completed pay period just
completed 243.00 4,178.60
4,421.60
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Payroll Records

• Purpose of employees earnings record
• Kept on a quarterly basis.
• Easier to complete government reports that are
  required each quarter.
• Preparing an employees earnings record
• At the end of a quarter, the amount columns on
  each employee earnings record are totaled. The
  final amount in the Accumulated Earnings column
  is carried forward to the top of the employee
  earnings record for the next quarter.

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Payroll Records

• Computerized Payroll System
• Performs all the payroll calculations
• Prepares and prints the payroll register
• Prints the payroll checks and stubs
• Maintains the employee's earnings records

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Employers Payroll Taxes

• Employer's FICA Taxes
• Under the Federal Insurance Contribution Act,
  both the employee and the employer pay FICA
  taxes.
• Current rate for social security is 6.2
• Up to maximum taxable limit
• 1.45 for Medicare tax
• No maximum taxable limit

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Employers Payroll Taxes

• Federal Unemployment Tax Acts (FUTA) and the
  State Unemployment Tax Act (SUTA)
• Requires employers to pay unemployment taxes.
• Based on a percentage of the employees' gross
  earnings.
• Collected to provide funds for workers
  temporarily unemployed.
• Employer pays both federal and state unemployment
  taxes.
• Maximum federal unemployment tax is 6.2 on the
  first 7,000 of an employee's annual wages.
• State unemployment tax rates and maximum taxable
  amounts vary among states.
• Employers may deduct up to 5.4 of the state
  unemployment taxes from federal unemployment
  taxes. Most employers, therefore, pay a federal
  tax of .8 (6.2-5.4) of taxable gross earnings.

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TAX LIABILITY PAYMENTS AND TAX REPORTS

• Federal Tax Deposit Coupon (Form 8109)
• form prepared by the employer to send in FICA and
  federal income taxes to the federal government.
• Electronic Federal Tax Payment System (EFTPS)
• means of transferring federal taxes
  electronically to the U. S. Government.
• Form 940
• used to report the employer's unemployment (state
  and federal) taxes.
• Form 941
• form used by the employer to report quarterly
  taxes consisting of both FICA and federal.

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Paying the Payroll Taxes

• FICA and Federal Income Taxes
• One payment
• Social security and Medicare taxes (both the
  employees' and the employer's shares)
• Employees' federal income taxes withheld
• State Income Taxes
• Each state determines how and when the payments
  are made and what reports are filed.

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Paying the Payroll Taxes

• Federal Unemployment Taxes
• Most businesses pay the FUTA tax quarterly.
• If a business has accumulated federal
  unemployment taxes of less than 100 for the
  year, only one annual payment is necessary.
• State Unemployment Taxes
• Requirements for paying SUTA taxes vary from
  state to state.
• Usually paid on a quarterly basis.