Chapter 11 Payroll responsibilities within the accounting dept.

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Chapter 11Payroll responsibilities withinthe
accounting dept.
Family Economics Financial Education
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The Payroll Department

• Within the Accounting Department
• Employer has the responsibility to pay each
  employee a fair, non-discriminated salary
• www.salary.com to find your worth, according to
  zipcode
• Pay will vary according to Cost of Living
• Real Estate prices and Taxes are the major
  variable

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Payroll Tax evasionVideo http//www.myfoxphilly.
com/dpp/money/Nifty_Fifties_Tax_Troubles_051612

• The five owners and managers of the Nifty Fifty's
  restaurant chain have been charged with cheating
  the IRS out of millions of dollars, the U.S.
  Attorney's office announced on Wednesday.
• Robert Mattei, 73, of Delray Beach, Florida Leo
  McGlynn, 52, of Swarthmore, Pa. Brian Welsh, 48,
  of Springfield, Pa. Joseph Donnelly, 49, of
  Springfield, Pa. and Elena Ruiz, 46, of Drexel
  Hill, PA were charged in connection with an
  alleged tax evasion conspiracy.
• U.S. Attorney Zane Memeger said the five cheated
  the Internal Revenue Service by failing to
  properly account for more than 15 million in
  gross receipts, thereby evading 2.2 million in
  federal employment and personal taxes.
• http//abclocal.go.com/wpvi/story?sectionnews/loc
  alid8663808

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The Buffet Rule

• Listen
• www.whitehouse.gov/photos-and-video/video/2012/03/
  31/weekly-address-passing-buffett-rule-so-everyone
  -pays-their-fair-sh

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Payroll Deductions

• http//www.ehow.com/video_5112528_understanding-pa
  yroll-deductions.html

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Some Departments within accounting

• Auditing
• Payroll
• Benefits Administration Medical and Retirement
• Financial Reporting
• Cost
• Tax
• AP/AR management

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Accounting transactions

• Salary
• An Expense of doing business
• Gross Pay
• Salary Deductions (optional and required)
• Must be electronically deducted before employee
  receives paycheck
• Liabilities of doing business
• Transactions
• All payables are Credited (deducted from the
  employees paycheck)
• Employer owes this money to different
  agencies/companies
• Net Pay the amount the employee actually takes
  home after all deductions are made

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The Debits and Credits

• Gross Salary Expense
• DEBITED
• All Payables (deductions)
• CREDITED
• Net Pay Cash
• CREDITED

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What are Payroll Taxes?

• Taxes Required charges imposed on US citizens
  by local, state, and federal governments
• Used to provide public goods and services
• Largest amount of taxes a person pays is on
  his/her income

What are some services in your community that are
funded by tax dollars?
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Facts

• On average, approximately 40 of a persons
  paycheck will be deducted due to taxes, benefits,
  and investment choices before they even receive a
  paycheck
• Taxes- Required charges imposed on citizens by
  local, state, and federal governments

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Taxes

• Provide public goods and services

What is an item or service that you use every day
that is paid for by taxes?

• Citizens pay many different types of taxes in
  many different ways
• Income tax, sales tax, property tax
• Largest amount of taxes is paid on income

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REQUIRED TAX DEDUCTIONS

1. Federal Income Tax
2. Based on how much you make
3. US govt has 6 brackets
4. State Income tax flat rate based on state
5. Local Income tax flat rate based on township
6. FICA (Social Security Tax) 4.2
7. For those retired after age 62.5 or legally
   disabled to work
8. Unemployment tax - .08
9. Goes to those in your state that are unemployed
10. Medicare 1.45
11. Goes to those in our country who are uninsured,
    underinsured, or those retired that are eligible
    for govt aide

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Federal Income TaxBrackets

1. 10 - 0 to 8,375
2. 15 - 8,375 to 34,000
3. 25 - 34,000 to 83,600
4. 28 - 83,600 to 174,400
5. 33 - 171,850 to 373,650
6. 35 - 373,650 and up

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Taxes continued

• Internal Revenue Service (IRS) Collects federal
  taxes, issues regulations, and enforces tax laws
  written by the United States Congress for
  individuals and private businesses

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OPTIONAL PAYROLL DEDUCTIONS

• Medical Benefits health insurance
• Employer responsibility to have a relationship
  with 1 or more health insurance companies
• Offer benefits to your employees
• Employer pays a the employee pays a
  (premium)
• More the employer pays, the greater expense BUT
  it could make the employer more desirable/loyalty
• Retirement Planning
• Employer offers an investment firm to withdraw a
  of paycheck and invest in the stock market or
  other investment tool
• 401K (mutual funds or groups of stocks)
• IRA (retirement account, with interest)
• Money is UNTOUCHABLE until age 62.5 (penalty is
  20 for early/partial withdrawal)

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Largest Investment firms THAT Employers work with

• Vanguard and Fidelity
• Employee meets with a Financial Advisor to
  discuss investment strategy and retirement goals
  at time of Hiring
• Here is the Discussion
• How much should I invested each week from my
  Gross Pay?
• What stocks/investments/401ks should I invest in?
• What is my RISK tolerance?
• How long do I plan to work for?
• What age would I like to retire at?
• How much do I want waiting for me when I retire
  so I live comfortably?

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How are Taxes Paid?

• By Workers
• Through deductions made from your Gross Salary by
  your Employer Income Taxes
• By homeowners Real Estate and School Taxes
• By shoppers Sales Tax
• By businesses their profit is taxed

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Real Estate taxes

• These taxes are separate and not deducted from
  ones paycheck
• This is owed once a year by homeowners check
  sent to Local Government
• Broken into 2
• Property based on value of home
• School based on needs of school

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Starting a New Job
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Form W-4

• Employees Withholding Allowance Certificate
• Determines the percentage of gross pay which will
  be withheld for taxes
• Allowances
• Used to determine the amount of federal taxes
  withheld from the paycheck
• Dependents lower your taxes!
• Dependent a person who relies on the taxpayer
  for financial support

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Form I-9

• Employment Eligibility Verification Form
• Used to verify the eligibility of individuals to
  avoid hiring undocumented workers or others who
  are not eligible to work in the United States
• Must provide documentation which establishes
  identity and employment eligibility
• Examples include drivers license, passport,
  Social Security card, and birth certificate

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Form I-9Employment Eligibility Verification Form

• Verifies the eligibility of individuals to avoid
  hiring undocumented workers or others who are not
  eligible to work in the United States

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Methods for paying employees

1. Live Check
2. Direct Deposit

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Reading a Paycheck
Family Economics Financial Education
Why is it important to read your paycheck stub?
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Paycheck Stub
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Paycheck Stub
• A document included each pay period which
  outlines paycheck deductions

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Personal Information
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Personal Information
• States the employees full name, address, and
  social security number
• Always check to ensure this information is correct

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Pay Period
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Pay Period
• The length of time for which an employees wages
  are calculated most are weekly, bi-weekly, twice
  a month, or monthly
• The last day of the pay period is not always
  payday to allow a business to accurately compute
  wages

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Gross Pay
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Gross Pay
• The total amount of money earned during a pay
  period before deductions
• This is calculated by multiplying the number of
  hours worked by the hourly rate
• If a person is on salary, it is the total salary
  amount divided by the specified time period

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Net Pay
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Net Pay
• The amount of money left after all deductions
  have been withheld from the gross pay earned in
  the pay period

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Deductions
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Deductions
• The amount of money subtracted from the gross pay
  earned for mandatory systematic taxes, employee
  sponsored medical benefits, and/or retirement
  benefits

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Year-to-Date
On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go On-The-Go
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102          
  Pay Type-Gross Pay Deductions Deductions Current Year-to-date
   1,353.33 Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K Federal WithholdingState WithholdingFed OASDI/EE or Social Security Fed MED/EE or MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
    Totals Totals 250.35 1,502.10
Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009 Pay Period 6/11/2009-7/11/2009

• Year-to-Date
• Total of all of the deductions which have been
  withheld from an individuals paycheck from
  January 1 to the last day of the pay period
  indicated on the paycheck stub

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Conclusion

• Review the following concepts
• Form W-4
• Form I-9
• Reading a paycheck definitions
• Net vs. gross pay
• Required and Optional deductions

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Activity

• Calculating Payroll
• Using Excel to calculate payroll and make
  deductions
• Chapter 11 on website