Payroll Accounting, Taxes,

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Payroll Accounting, Taxes, Reports
Chapter 15
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Journalizing Payment of a Payroll

• When you Journalize a payment entry you
• Write the date in the Date Column.
• The title of the account debited is recorded in
  the Account Title column.
• The check number is entered into the Doc. No.
  column.
• The amount debited is written in the General
  Debit Column.
• On the same line, the net amount paid to
  employees is written in the Cash Credit column.
• The five liability accounts are credited for the
  amount deducted from employee salaries. The five
  accounts are written in the Account Title column
  under the title of the account.
• The five credited accounts are written in the
  General Credit column.

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Posting the Journal Entry of Payroll

• Accounts recorded in the General columns of a
  journal are posted individually to general ledger
  accounts. Credit is not posted separately to the
  Cash Account. The amount is included in the
  Journals Cash Credit column total that is posted
  at the end of the month.

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Calculating Employer Payroll Taxes

• Most employers must pay three separate payroll
  taxes.
• These are 1.) employer FICA taxes
• 2.) Federal Unemployment Taxes
• 3.) State Unemployment Taxes
• Employer payroll taxes expenses are based on a
  percentage of employee earnings.

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Employer FICA Taxes

• As you already know FICA stands for Federal
  Insurance Contribution Act. Congress sets the
  FICA tax rates for employees and employers.
  Periodically, Congress may change the tax rate
  and tax base. FICA is divided into two groups.
  Those two groups also have different tax bases.
  The tax rate for Old-age, Survivors, and
  Disability is 6.5 this rate is base on earnings
  up to 55,500. The tax rate for Medicare is 1.5
  based on earnings up to 130,200 earning.
  
  Tax Rate Base

Old-age, survivors,
6.5 55,500 Disability
Medicare
1.5 130,200
FICA Taxes are the only taxes paid by both
employers employees. The taxes are first
deducted from the employee. Then the employer has
to pay the same amount deducted to the
government.
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Federal Unemployment Tax

• Federal Unemployment Insurance laws require
  employers to pay taxes for unemployment
  compensation. They have to pay these taxes
  because they are used to support people who are
  unemployed. The unemployment tax for most
  businesses is about .8 of each workers earnings
  up to a tax base of 7,000 annually.

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State Unemployment Tax

• Most States require that employers pay 5.4
  State Unemployment Tax. The unemployment taxable
  earnings used in federal taxes are also used in
  State Unemployment Taxes.

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Journalizing Employer Payroll Taxes

• Employers payroll taxes are paid to the
  government at a later date but the liability is
  incurred when salaries are paid. So, the
  transaction to record employer payroll tax
  expensed are journalized at the same time as the
  payroll.
• The date is written in the Date column. The title
  of the account debited is written in the Account
  Title column. The memorandum number is entered in
  the Doc. No. column. The debit amount is entered
  in the Account Title column. The amounts credited
  to the liability accounts are entered in the
  General Credit column.

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Summarizing of Amounts Posted to the General
Ledger.
Both the employees and employer owe payroll
taxes. Federal income tax and FICA tax are
withheld from employee salaries. An equal amount
of FICA tax is owed by the employer. The employer
must also record federal and state unemployment
taxes.
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Paying Withholding and Payroll Taxes

• At least quarterly, employers must pay federal
  income taxes withheld from employee salaries.
• Among these taxes are
• 1.) Employee Income Taxes and FICA Tax
• 2.) Liability Taxes for Both Federal State
  Unemployment

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Quiz Time !!!
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1.) What circle would you mark if you were
filling out a Federal Tax Deposit coupon for
Employee Income Tax FICA taxes?

• A.) 941

B.) 720
C.) 940
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What circle would you mark if you were filling
out a Federal Tax Coupon of Unemployment?
A.) 1042
B.) CT-1
C.) 940
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Which of the following isnt one of the three
payroll taxes paid by the employer?
A.) Employer FICA Tax B.) Federal Unemployment
Tax C.) State Unemployment Tax D.) Purchase
Taxes
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Which of these payroll taxes are deposited with
the 8190 form?
A.) Federal Unemployment Tax B.) Employee Income
Tax C.) FICA Tax D.) All of the above
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Employment Income Tax and FICA Tax

• Employee withheld income tax, employee FICA tax,
  and employer FICA tax are paid periodically in a
  combined payment. A payment is accompanied by
  Form 8109, Federal Tax Deposit Coupon, which
  shows the amount and purpose of the payment.

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Form 8109(Federal Tax Deposit Coupon)
The calendar quarter is identified on the right
side of the form.
Employment Income Tax Payable is debited for
402.00. FICA Tax Payable is debited 832.16. The
balance of the Cash Account is decreased by a
credit for the total payment , 1,234.16.
The type of tax, federal income and FICA taxes,
is identified by marking the 941 circle.
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Federal Unemployment Tax

• Federal unemployment tax is usually paid after
  the end of each quarter. Federal Unemployment tax
  paid to the federal government by sending the
  check to a designated bank. The payment for
  federal unemployment tax is similar to the one
  required for income tax and FICA tax. Form 8109,
  Federal Tax Deposit Coupon, accompanies the
  unemployment tax payment.

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Form 8109(Federal Tax Deposit Coupon)
The calendar quarter is identified on the right
side of the form.
The balance of liability account is reduced by
this transaction. Therefore, Unemployment Tax
Payable Federal is debited for 59.15
The type of tax, federal unemployment tax, is
identified by marking the 940 circle since this
tax is reported to the government using Form 940.
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State Unemployment Tax

• State requirements for reporting and paying
  state unemployment taxes vary. In general,
  employers are required to pay the state
  unemployment tax during the month following each
  calendar quarter. It uses the same form as
  Federal Unemployment Tax.