Transcript Lesson 12-1

LESSON 12-2
Determining Payroll Tax
Withholding
CENTURY 21 ACCOUNTING © Thomson/South-Western
Determining Payroll Tax Withholding
 Payroll taxes– taxes based on the payroll of a
business
 Business is required by law to withhold certain
payroll taxes from employee salaries
 Payroll taxes are based of employee total
earnings
 ACCURATE and DETAILED payroll records must
be maintained
 Payroll taxes are a liability to the employer until
paid to the government
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Employee Income Tax
 Federal income tax must be withheld from employee
earnings
 Some require state, city or county income taxes as
well
 Taxes are forwarded to the government periodically
CENTURY 21 ACCOUNTING © Thomson/South-Western
Withholding allowance certificate
 Read p. 346
 Withholding allowance: deduction from total
earnings for each person legally supported by a
taxpayer, including the employee
 Employers must have W-4 on file
 Tax withheld is based on the employee’s marital
status and number of allowances
 Read FYI p. 346
CENTURY 21 ACCOUNTING © Thomson/South-Western
5
EMPLOYEE’S WITHHOLDING ALLOWANCE
page 346
CERTIFICATE
3
2
1
4
5
1.
2.
3.
4.
5.
Write the employee’s name and address
Write the employee’s social security number.
Check the appropriate marital status block.
Write the total number of withholding allowances claimed.
The employee signs and dates the form.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 12-2
6
EMPLOYEE’S INCOME TAX WITHHOLDING
page 348
– MARRIED PERSONS
1
2
3
1. Select the appropriate table.
2. Locate the employee’s total earnings.
3. Intersection of wages and number of allowances column.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 12-2
Examples on Reading Charts

1.
2.
Take out a piece of paper
Single, paid semimonthly, TE=$1050.00
Married, paid semimonthly, TE= $1050.00
CENTURY 21 ACCOUNTING © Thomson/South-Western
Employee Social Security and Medicare
 Read p. 349
 SS = federal tax for old age, survivors, and
disability insurance
 Medicare- federal tax paid or hospital insurance
 Accounted for and reported separately
 Paid by both the Employee and Employer
 Employees withhold and deposit employee and
contribution and then they match it
CENTURY 21 ACCOUNTING © Thomson/South-Western
Social Security
 Calculated on Employee earnings up to a maximum
paid in a calendar year
 Tax base= maximum amount of earnings on which
tax is calculated
 Congress sets tax rate and base for SS
 6.2% max $87,000 in a calendar year
CENTURY 21 ACCOUNTING © Thomson/South-Western
Medicare
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


No tax base
1.45%
FYI p. 349
Practice WT/ OYO
CENTURY 21 ACCOUNTING © Thomson/South-Western
11
TERMS REVIEW



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page 350
payroll taxes
withholding allowance
social security tax
Medicare tax
tax base
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 12-2
Review Quiz
1. What is payroll?
2. How many hours were worked if employee
arrived at 8:29 and departed at 12:02?
3. How is overtime calculated in this text?
4. What is the % for Social Security and
Medicare? Is there a tax base?
5. Where does an employer get the
information used to determine the amount
of federal income tax withheld?
6. Federal income tax withholdings are
based on what two factors?
7. Who pays SS tax and Medicare tax -Employee or employer?
CENTURY 21 ACCOUNTING © Thomson/South-Western