Chapter Eight - North Seattle College

Transcript Chapter Eight - North Seattle College

Chapter Eight

Employee Earnings and Deductions

Performance Objectives

Understand the role of laws that affect payroll deductions and contributions Calculate total earnings based on an hourly, piece-rate, or commission basis Determine deductions using tables of employees’ income tax withholding

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Performance Objectives

Complete a payroll register Journalize the payroll entry from a payroll register Maintain employees’ individual earnings records

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Employer Requirements

• • • • To withhold federal and state taxes from employees’ paychecks To pay the withholdings (as well as other payments) to government agencies before specific deadlines To submit federal and state reports on official forms This makes payroll accounting very important!

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Required Payroll Records

– – – – Employee personal information Name Address Social Security number Date of birth – – Data on wage payments Dates and amounts of payments Payroll periods – Amount of taxable wages paid Dates and amounts earned year to date for the calendar year involved Amount of taxes withheld for each employee by pay period

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Calendar Year

• A twelve-month period beginning on January 1 and ending on December 31 of the same year

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Employees and Independent Contractors

• • • Employee – Under “direction and control” of employer Independent contractor – Someone who is engaged for a definite job or service – – Not under “direction and control” of employer Decides how to do his or her own work Payments to independent contractors not subject to withholding or payroll taxes

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Objective 1

Understand the role of laws that affect payroll deductions and contributions

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Laws Affecting Employees’ Pay Deductions

• • Fair Labor Standards Act – The act of 1938 that provides for minimum standards for wages and overtime, including provisions related to child labor and equal pay for equal work Current Tax Payment Act – An act to require employers to withhold and pay to the Internal Revenue Service employee funds

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Laws Affecting Employees’ Pay Deductions

• FICA Tax (employees’ share) – Social Security Act of 1935 and its amendments provide benefits for retired workers, their spouses and minor children, disability insurance, Medicare, and supplemental security income – Employees contribute 6.2 percent on first $84,900 earned in a calendar year for Social Security – Employees contribute 1.45 percent on all earnings in calendar year for Medicare

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Laws Affecting Employer’s Payroll Tax Contributions

• • • • Federal Insurance Contribution Act (FICA) State Unemployment Tax Act (SUTA) Federal Unemployment Tax Act (FUTA) Workers’ compensation laws

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FICA Taxes

• Social Security taxes plus Medicare taxes, paid by both employee and employer under the provisions of the Federal Insurance Contributions Act • Employer matches employee contribution

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State Unemployment Tax Act (SUTA)

• • • A tax levied only on the employer in most states Rates differ among the various states; however, they are generally 5.4 percent or higher on the first $7,000 of total earnings paid to each employee during the calendar year Proceeds used to pay subsistence benefits to unemployed workers

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Federal Unemployment Tax Act (FUTA)

• • A tax levied only on the employer, equal to 0.8 percent of the first $7,000 of total earnings paid to each employee during the calendar year This tax is used to support government run employment offices throughout the country

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Workers’ Compensation Laws

• Laws that protect employees and dependents against losses due to death or injury incurred on the job

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Payment Periods

• • Weekly Bi-weekly – 26 times a year • Semimonthly – 24 times a year • Monthly

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Earnings

• • • • • Wages – Contract states hourly, weekly, or piecework rate of pay Salary – Contract states monthly or yearly earnings Overtime —generally 1 ½ pay, minimums per FLSA Supplemental pay – Commissions – – – Bonuses Cost-of-living adjustments Profit sharing Paid by – – Check or cash Other assets (recorded at market value, or fair value)

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Performance Objective 2

Calculate total earnings based on an hourly, piece-rate, or commission basis

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Payroll

• In earlier chapters we have seen:

General Journal

Page 4 Date 1 2005 2 June 3 4 Description 24 Wages Expense Cash Paid wages of part-time employees (Ck. No. 3496) Post.

Ref.

Debit Credit 511 111 1,400.00

1,400.00

• • • • The $1,400.00 is really gross pay before deductions Gross pay (or earnings) – Total amount before deductions Deductions – Amounts taken out of an employee’s paycheck each pay period “Take home pay” or net pay – Gross pay minus deductions

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Time Card

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Calculate Hourly Wages and Overtime

Regular Hour Worked Overtime Hours Worked Monday - Wednesday Thursday Friday Saturday Total Gross Earnings Regular Pay Overtime Premium Total Gross Earnings Hourly Rate Assumptions Overtime Multiple $22.84

150% 40

Overtime by Day Method

Hours x Hourly Rate $913.60

0 2 1 3 Hours x Hourly Rate x Multiple = Hours x Hourly Rate x Multiple = Hours x Hourly Rate x Multiple = Hours x Hourly Rate x Multiple = 0 $ 68.52

34.26

102.78

$1,119.16

46 6

Overtime Premium Method

Total Hours x Hourly Rate Overtime Hours x (Multiple - 100%) x Hourly Rate $1,050.64

68.52

$1,119.16

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Calculate Hourly Overtime for Salary

Assumptions Monthly Salary Overtime Multiple Hours Worked in One Week Overtime Hours $2,250.00

1.5

40 4 Calculate Yearly Pay

(1) Calculate Hourly Rate First

Monthly Salary x 12 Calculate Weekly Pay Calculate Hourly Pay Yearly Salary / 52 Weekly Salary / 40 $27,000.00

$519.23

$12.98

Regular Pay Overtime Pay Total Gross earnings

(2) Then Calculate Overtime

Hours x Hourly Rate Hours x Hourly Rate x Multiple $ 519.20

$ 77.88

$ 597.08

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Piece Rate

Piece rate per boomerang finished Number of boomerangs per week Total gross pay for the week (Piece rate x number of boomerangs) $2.12

500 $1,060.00

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Commission

Vicky Chan Jamal Robertson Walt Dickenson Sue Wong Tom Carolyn Totals

January Sales

$125,000 $97,855 $81,250 $95,500 $78,550

Commission on Sales (Jan. Sales x Commission Rate)

$4,063 $3,180 $2,641 $3,104 $2,553

Base Salary (from Contract)

$1,725 $1,725 $1,725 $1,725 $1,725

Gross Pay (Comm. + Base)

$5,788 $4,905 $4,366 $4,829 $4,278

Commission Rate

3.25%

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Deductions from Total Earnings

Federal income tax withholding State income tax withholding FICA tax (Social Security and Medicare), employee’s share Purchase of U.S. savings bonds Union dues Insurance deductions (medical or life) Charitable contributions Pension contributions 9.

– Credit union Automatic savings – Automatic loan repayment 10.

Other deductions possible

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Employees’ Federal Income Tax Withholding: Employer Requirements

• • • Withhold federal income taxes from employees’ paychecks Pay the withheld federal income taxes to the IRS Keep required records

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Basis of Federal Income Tax Withholding

• • Taxable earnings – The amount of an employee’s earnings subject to a tax Marital status • Number of withholding allowances claimed • • Withholding allowance – Amount of earnings that are exempt from federal income tax – How many?

• One for personal • • One for spouse One for each dependent Exemption – Amount of yearly earnings that are not taxed

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Employee’s Withholding Allowance Certificate (Form W-4)

• A form that specifies the number of allowances claimed by each employee • Gives the employer the authority to withhold money for an employee’s federal income taxes and FICA taxes • Must be filled out by every employee

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Circular E

• • • • Actual book or downloadable files to use in spreadsheet or accounting program provided free of charge by IRS to employers Contains withholding tables – – Federal income tax FICA • • Social Security Medicare Lists rules for employer’s deposits Lists requirements for submitting reports

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Wage-Bracket Tax Tables

• • Tables providing the amounts to be deducted for income taxes based on earnings, marital status, and number of allowances claimed Payment periods covered – – – – – Monthly Semimonthly Biweekly Weekly Daily

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Using the Tables to Determine Deductions

• • • • • Step 1: Select correct table for payment period and marital status Step 2: Locate gross pay in first two columns Step 3: Find column for number of withholding allowances Intersection shows amount of federal income tax to withhold from paycheck Be careful of: – – “At least” “But less than”

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State Income Tax Withholding

• • State tables or Percentage of federal income tax deduction – Textbook assumes that employee’s state income tax deduction is 20% of the federal income tax deduction

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FICA Taxes

• • • Social Security Taxes Federal taxes levied on employees and employers Proceeds used for – Pension payments after a worker has reached 62 years – Disability benefits for disabled worker and dependents • • • Medicare Taxes Federal taxes levied on employees and employers Proceeds used for medical insurance for eligible people age 65 or over

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FICA Taxes

• • • • Social Security rate = 6.2% (number equivalent = .062) – Only the first $84,900 of earnings are taxed Medicare rate = 1.45% (number equivalent = .0145) – All earnings are taxed Applied to gross earnings during a calendar year Calculated separately because of the different upper limits for two types of taxes

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Calculating FICA Taxes

Vicky Wise Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $1,119.16

$32,890.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction FICA Medicare Deduction

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Calculating FICA Taxes

Vicky Wise Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $1,119.16

$32,890.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction ($1,119.16*0.062) = FICA Medicare Deduction (Earnings*Rate)

$69.39

$16.23

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Calculating FICA Taxes

Tommy Webster Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $4,000.00

$81,233.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction FICA Medicare Deduction

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Calculating FICA Taxes

Tommy Webster Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $4,000.00

$81,233.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction ($84,900 - $81,233)*0.062 = FICA Medicare Deduction (Earnings*Rate)

$227.35

$58.00

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Calculating FICA Taxes

Arwin King Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $1,050.00

$85,525.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction FICA Medicare Deduction

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Calculating FICA Taxes

Arwin King Week Earnings = Cumulative Earnings to Date = FICA Social Security Maximum Social Security Rate Medicare Rate $1,050.00

$85,525.00

$84,900.00

6.20% 1.45% FICA Social Security Deduction ($85,525 > $84,900, thus: no tax) FICA Medicare Deduction (Earnings*Rate)

$0.00

$15.23

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Unemployment Taxes

• • • Unemployment taxable earnings represent remaining untaxed earnings up to state and federal maximum Not paid by employee in most states Paid by employer on the employee’s behalf

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Performance Objective 4

Complete a payroll register

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Payroll Register

• A multicolumn form prepared for each payroll period listing the earnings, deductions, and net pay for each employee

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Payroll Register for Week Ended: October 7, 2005

Name

Asino, Matte E.

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals

Total Hours

46 45 49 40 40 40 55 40 44 45 40 52

Beginning Cumulative Earnings

32,890.00

6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

Regular 913.60

619.20

684.60

1,073.25

1,888.89

1,891.67

1,023.33

1,271.75

1,304.72

1,527.17

1,168.83

1,990.56

15,357.57

Earnings

Overtime 205.56

116.10

231.05

0.00

575.63

0.00

195.71

286.34

0.00

895.68

2,506.07

Total 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

Ending Cumulative Earnings

34,009.16

6,927.30

7,761.65

39,710.25

69,888.89

69,991.67

38,438.96

47,054.75

48,470.43

56,791.51

43,246.83

87,486.24

549,777.64

Taxable Earnings

Unemployment 0.00

Social Security 1,119.16

735.30

154.00

0.00

889.30

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

300.00

15,277.40

Medicare 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

State Income Tax 30.00

16.00

21.40

24.60

78.80

79.00

62.40

38.60

56.80

74.40

32.80

133.00

647.80

Social Security Tax 69.39

45.59

56.77

66.54

117.11

117.28

99.14

78.85

93.03

112.44

72.47

18.60

947.21

Medical Insurance 11.19

11.03 UW 13.73 UW 16.10

28.33 UW 28.38 UW 23.98 UW 19.08 UW 22.51

27.20 AR 17.53 UW 41.44 UW 260.50

Total Deductions 276.81

175.28

227.18

245.80

645.63

657.09

532.70

367.97

478.10

662.34

328.75

929.89

5,527.54

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Compare Beginning Cumulative Earnings with Maximums for Social Security and Unemployment

Name

Asino, Matte E.

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals

Total Hours

46 45 49 40 40 40 55 40 44 45 40 52

Beginning Cumulative

32,890.00

6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

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Calculate Regular and Overtime Earnings

Name

Asino, Matte E.

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals

Total Hours

46 45 49 40 40 40 55 40 44 45 40 52

Beginning Cumulative

32,890.00

6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

Regular 913.60

619.20

684.60

1,073.25

1,888.89

1,891.67

1,023.33

1,271.75

1,304.72

1,527.17

1,168.83

1,990.56

15,357.57

Earnings

Overtime 205.56

116.10

231.05

0.00

575.63

0.00

195.71

286.34

0.00

895.68

2,506.07

Total 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

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Calculate Ending Cumulative Earnings

Name

Asino, Matte E.

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals

Total Hours

46 45 49 40 40 40 55 40 44 45 40 52

Beginning Cumulative

32,890.00

6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

Regular 913.60

619.20

684.60

1,073.25

1,888.89

1,891.67

1,023.33

1,271.75

1,304.72

1,527.17

1,168.83

1,990.56

15,357.57

Earnings

Overtime 205.56

116.10

231.05

0.00

575.63

0.00

195.71

286.34

0.00

895.68

2,506.07

Total 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

Ending Cumulative

34,009.16

6,927.30

7,761.65

39,710.25

69,888.89

69,991.67

38,438.96

47,054.75

48,470.43

56,791.51

43,246.83

87,486.24

549,777.64

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Calculate Taxable Earnings Unemployment 0.00

735.30

154.00

0.00

Taxable Earnings

Social Security 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

0.00

889.30

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

300.00

15,277.40

Medicare 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

We calculate the amount of earnings that are taxable for the unemployment taxes. We will use this amount in Chapter 9 to calculate the tax.

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Calculate Deductions

Federal Income Tax 150.00

80.00

107.00

123.00

394.00

395.00

312.00

193.00

284.00

372.00

164.00

665.00

3,239.00

State Income Tax 30.00

16.00

21.40

24.60

78.80

79.00

62.40

38.60

56.80

74.40

32.80

133.00

647.80

Deductions

Social Security Tax 69.39

45.59

56.77

66.54

117.11

117.28

99.14

78.85

93.03

112.44

72.47

18.60

947.21

Medicare Tax 16.23

10.66

13.28

15.56

27.39

27.43

23.18

18.44

21.76

26.30

16.95

41.85

259.03

Medical Insurance 11.19

11.03 UW 13.73 UW 16.10

28.33

28.38 UW 23.98 UW 19.08 UW 22.51

27.20 AR 17.53 UW 41.44 UW 260.50

Other 12.00

15.00

10.00

12.00

20.00

50.00

25.00

30.00

174.00

Total Deductions 276.81

175.28

227.18

245.80

645.63

657.09

532.70

367.97

478.10

662.34

328.75

929.89

5,527.54

From Tables 20% of Fed. Tax Calculate, 6.2% 84,900 Calculate, 1.45% Given Given UW = United Way AR = A/R

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Total Earnings – Total Deductions = Net Pay & Two Different Wages Expenses

Earnings

Total 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

… Total Deductions 276.81

175.28

227.18

245.80

645.63

657.09

532.70

367.97

478.10

662.34

328.75

929.89

5,527.54

Payments

Net Amount 842.35

560.02

688.47

827.45

1,243.26

1,234.58

1,066.26

903.78

1,022.33

1,151.17

840.08

1,956.35

12,336.10

Ck. No.

931 932 933 934 935 936 937 938 939 940 941 942

Expense Account Debited

Sales Wages Expense Office Wages Expense 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

13,626.97

4,236.67

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Performance Objective 5

Journalize the payroll entry from a payroll register

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Journalize the Payroll Entry from a Payroll

Name

Asino, Matte E.

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals

Total Hours

46 45 49 40 40 40 55 40 44 45 40 52

Beginning Cumulative Earnings

32,890.00

6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

Regular 913.60

619.20

684.60

1,073.25

1,888.89

1,891.67

1,023.33

1,271.75

1,304.72

1,527.17

1,168.83

1,990.56

15,357.57

Register

Earnings

Overtime 205.56

116.10

231.05

0.00

575.63

0.00

195.71

286.34

0.00

895.68

2,506.07

Total 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

Ending Cumulative Earnings

34,009.16

6,927.30

7,761.65

39,710.25

69,888.89

69,991.67

38,438.96

47,054.75

48,470.43

56,791.51

43,246.83

87,486.24

549,777.64

Taxable Earnings

Unemployment 0.00

Social Security 1,119.16

735.30

154.00

0.00

889.30

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

300.00

15,277.40

Medicare 1,119.16

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

Federal Income Tax 150.00

80.00

107.00

123.00

394.00

395.00

312.00

193.00

284.00

372.00

164.00

665.00

3,239.00

State Income Tax 30.00

16.00

21.40

24.60

78.80

79.00

62.40

38.60

56.80

74.40

32.80

133.00

647.80

Deductions

Social Security Tax 69.39

45.59

56.77

66.54

117.11

117.28

99.14

78.85

93.03

112.44

72.47

18.60

947.21

Medicare Tax 16.23

10.66

13.28

15.56

27.39

27.43

23.18

18.44

21.76

26.30

16.95

41.85

259.03

Expense Medical Insurance 11.19

11.03 UW 13.73 UW 16.10

28.33 UW 28.38 UW 23.98 UW 19.08 UW 22.51

27.20 AR 17.53 UW 41.44 UW 260.50

Other 12.00

15.00

10.00

12.00

20.00

50.00

25.00

30.00

174.00

Total Deductions 276.81

175.28

227.18

245.80

645.63

657.09

532.70

367.97

478.10

662.34

328.75

929.89

5,527.54

Payments

Net Amount Check # 842.35

560.02

688.47

827.45

931 932 933 934 1,243.26

1,234.58

1,066.26

903.78

1,022.33

1,151.17

840.08

1,956.35

12,336.10

935 936 937 938 939 940 941 942

8 - 53

Payroll Journal Entry: Expenses

Date 2005 October

General Journal

Description 7 Sales Wages Expense Office Wages Expense Post.

Ref.

page 5 Debit 13,626.97

4,236.67

Credit

8 - 54

Journalize the Payroll Entry from a Payroll Register

Ending Beginning Earnings Taxable Earnings Name

Asino, Matte E.

Total Hours

Cumulative Earnings

32,890.00

Regular 913.60

Overtime 205.56

Total 1,119.16

Cumulative Earnings

34,009.16

Unemployment 0.00

Social Security 1,119.16

Medicare 1,119.16

Boritsky, Olga Dray, Greg G.

Foulkes, Bob L.

Groyer, Milli K.

Kramer, Ada A.

Minkowitz, John L.

Orleons, Janet C.

Pinkovich, Mark S.

Romero, Sheila J.

Tivoli, Jake T.

Wilson, Sharlet D.

Totals 45 49 40 40 40 55 40 44 45 40 52 6,192.00

6,846.00

38,637.00

68,000.00

68,100.00

36,840.00

45,783.00

46,970.00

54,978.00

42,078.00

84,600.00

531,914.00

619.20

684.60

1,073.25

1,888.89

1,891.67

1,023.33

1,271.75

1,304.72

1,527.17

1,168.83

1,990.56

15,357.57

116.10

231.05

0.00

575.63

0.00

195.71

286.34

0.00

895.68

2,506.07

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

6,927.30

7,761.65

39,710.25

69,888.89

69,991.67

38,438.96

47,054.75

48,470.43

56,791.51

43,246.83

87,486.24

549,777.64

735.30

154.00

0.00

889.30

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

300.00

15,277.40

735.30

915.65

1,073.25

1,888.89

1,891.67

1,598.96

1,271.75

1,500.43

1,813.51

1,168.83

2,886.24

17,863.64

Federal Income Tax 150.00

80.00

107.00

123.00

394.00

395.00

312.00

193.00

284.00

372.00

164.00

665.00

3,239.00

State Income Tax 30.00

16.00

21.40

24.60

78.80

79.00

62.40

38.60

56.80

74.40

32.80

133.00

647.80

Social Security Tax 69.39

45.59

56.77

66.54

117.11

117.28

99.14

78.85

93.03

112.44

72.47

18.60

947.21

Deductions

Expense Medicare Tax 16.23

10.66

13.28

15.56

27.39

27.43

23.18

18.44

21.76

26.30

16.95

41.85

259.03

Medical Insurance 11.19

11.03 UW 13.73 UW 16.10

28.33 UW 28.38 UW 23.98 UW 19.08 UW 22.51

27.20 AR 17.53 UW 41.44 UW 260.50

Other 12.00

15.00

10.00

12.00

20.00

50.00

25.00

30.00

174.00

Total Deductions 276.81

175.28

227.18

245.80

645.63

657.09

532.70

367.97

478.10

662.34

328.75

929.89

5,527.54

Payments

Net Amount Check # 842.35

560.02

688.47

827.45

931 932 933 934 1,243.26

1,234.58

1,066.26

903.78

1,022.33

1,151.17

840.08

1,956.35

12,336.10

935 936 937 938 939 940 941 942 Payables

8 - 55

Payroll Journal Entry: Expenses and Payables

Date 2005 October

General Journal

Description 7 Sales Wages Expense Office Wages Expense Employees’ Federal Income Tax Payable FICA Tax Payable Employees' State Income Tax Payable Employees' Medical Insurance Payable Employees' United Way Payable Accounts Receivable Wages Payable Payroll Register, for week ended Oct. 7 Post.

Ref.

page 5 Debit Credit 13,626.97

4,236.67

3,239.00

1,206.24

647.80

260.50

124.00

50.00

12,336.10

8 - 56

Payroll Journal Entry

Although Social Security & Medicare taxes are calculated separately, they are treated as a single payable because they will be paid at the same time

General Journal

page 5 Date 2005 October Description 7 Sales Wages Expense Office Wages Expense Employees Federal Income Tax Payable FICA Tax Payable Employees' State Income Tax Payable Employees' Medical Insurance Payable Employees' United Way Payable Accounts Receivable Wages Payable Payroll Register, for week ended Oct. 7 Post.

Ref.

Debit Equivalent to sum of take home pay for all employees Credit 13,626.97

4,236.67

3,239.00

1,206.24

647.80

260.50

124.00

50.00

12,336.10

8 - 57

Paying Employees from Regular Checking Account

8 - 58

Paycheck

8 - 59

Payroll Bank Account

• • A special checking account used to pay a company’s employees Money transferred from the regular checking account to the payroll account

8 - 60

Journal Entry for Paying Employees from Payroll Bank Account

General Journal

Date 2005 October Description 8 Wages Payable Cash—Payroll Bank Account Paid wages for week ended October 7 Clear payable with a debit Page 11 Post.

Ref.

Debit 12,336.10

Credit 12,336.10

Credit Cash — Payroll Bank Account

8 - 61

Performance Objective 6

Maintain employees’ individual earnings records

8 - 62

Employee’s Individual Earnings Record

• A supplementary record for each employee showing personal payroll data and yearly cumulative earnings, deductions, and net pay • Contains source data for the required payroll tax reports

8 - 63

Employee’s Individual Earnings Record

8 - 64

Demonstration Problem

Payroll Problem Payroll Register for Week Ended October 14, 2005—page 72 Names Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. L.

Gell, M. A.

Beg. Cum. Earn.

6,820.00

6,840.00

36,320.00

69,043.00

84,857.00

85,430.00

Week's Earnings 480.00

470.00

740.00

540.00

1,389.00

1,690.00

Unemployment

UE Max

$7,000.00

Fed Rate

0.008

State Rate

0.054

FICA

SS Max

$84,900.00

SS Rate

6.20% FICA

Medicare Max M Rate

1.45%

8 - 65

Look to Beginning Earnings to Determine If There Are Taxable Earnings

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. L.

Gell, M. A.

Totals

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72 Total 480.00

470.00

Ending Cumulative Earnings

Unemployment

Taxable Earnings

Social Security 36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

0.00

Medicare 0.00

8 - 66

Calculate Ending Cumulative Earnings

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. L.

Gell, M. A.

Totals

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72

Ending Cumulative Taxable Earnings

Social Total 480.00

470.00

Earnings

7,300.00

7,310.00

Unemployment Security 36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

37,060.00

69,583.00

86,246.00

87,120.00

294,619.00

0.00

Medicare 0.00

8 - 67

Calculate Taxable Earnings

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. .

Gell, M. A.

Totals

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72

Ending Cumulative Taxable Earnings

Social Total 480.00

470.00

Earnings

7,300.00

7,310.00

Unemployment 180.00

160.00

Security 480.00

470.00

36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

37,060.00

69,583.00

86,246.00

87,120.00

294,619.00

0.00

340.00

740.00

540.00

43.00

0.00

2,273.00

Medicare 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

8 - 68

Calculate Deductions

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. .

Gell, M. A.

Totals Federal Income Tax 46.00

45.00

85.00

55.00

238.00

64.00

533.00

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72

Ending Cumulative Taxable Earnings

Social Total 480.00

470.00

Earnings

7,300.00

7,310.00

Unemployment 180.00

160.00

Security 480.00

470.00

36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

37,060.00

69,583.00

86,246.00

87,120.00

294,619.00

0.00

340.00

740.00

540.00

43.00

0.00

2,273.00

State Income Tax 5.52

5.40

10.20

6.60

28.56

7.68

63.96

Payroll Register for Week Ended October 14, 2005—page 72

Deductions

Social Security Tax 29.76

29.14

Medicare Tax 6.96

6.82

Total Deductions 88.24

86.36

Payments

Net Amount 45.88

33.48

2.67

0.00

140.93

10.73

7.83

20.14

24.51

76.99

151.81

102.91

289.37

96.19

814.88

0.00

Ck. No.

Medicare 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

Salary Expense

Salary Expense 0.00

8 - 69

Calculate Payments and Expense

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. .

Gell, M. A.

Totals Federal Income Tax 46.00

45.00

85.00

55.00

238.00

64.00

533.00

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72

Ending Cumulative Taxable Earnings

Social Total 480.00

470.00

Earnings

7,300.00

7,310.00

Unemployment 180.00

160.00

Security 480.00

470.00

36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

37,060.00

69,583.00

86,246.00

87,120.00

294,619.00

0.00

340.00

740.00

540.00

43.00

0.00

2,273.00

State Income Tax 5.52

5.40

10.20

6.60

28.56

7.68

63.96

Medicare 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

Payroll Register for Week Ended October 14, 2005—page 72

Deductions

Social Security Tax 29.76

29.14

Medicare Tax 6.96

6.82

Total Deductions 88.24

86.36

Payments

Net Amount 391.76

383.64

45.88

33.48

2.67

0.00

140.93

10.73

7.83

20.14

24.51

76.99

151.81

102.91

289.37

96.19

814.88

588.19

437.09

1,099.63

1,593.81

4,494.12

Ck. No.

714 715 716 717 718 719

Salary Expense

Salary Expense 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

8 - 70

Make Journal Entry from Register

Name

Barker, T. C.

Ellis, M. R.

Fisk, C. P.

Janus, V. O.

Pham, H. .

Gell, M. A.

Totals Federal Income Tax 46.00

45.00

85.00

55.00

238.00

64.00

533.00

Beginning Cumulative Earnings

6,820.00

6,840.00

Payroll Register for Week Ended October 14, 2005—page 72

Ending Cumulative Taxable Earnings

Social Total 480.00

470.00

Earnings

7,300.00

7,310.00

Unemployment 180.00

160.00

Security 480.00

470.00

36,320.00

69,043.00

84,857.00

85,430.00

289,310.00

740.00

540.00

1,389.00

1,690.00

5,309.00

37,060.00

69,583.00

86,246.00

87,120.00

294,619.00

0.00

340.00

740.00

540.00

43.00

0.00

2,273.00

State Income Tax 5.52

5.40

10.20

6.60

28.56

7.68

63.96

Medicare 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

Payroll Register for Week Ended October 14, 2005—page 72

Deductions

Social Security Tax 29.76

29.14

Medicare Tax 6.96

6.82

Total Deductions 88.24

86.36

Payments

Net Amount 391.76

383.64

45.88

33.48

2.67

0.00

140.93

10.73

7.83

20.14

24.51

76.99

151.81

102.91

289.37

96.19

814.88

588.19

437.09

1,099.63

1,593.81

4,494.12

Ck. No.

714 715 716 717 718 719

Salary Expense

Salary Expense 480.00

470.00

740.00

540.00

1,389.00

1,690.00

5,309.00

Expense 8 - 71

Date 2005 Oct.

Description 14 Salary Expense

Record Salary Expense

General Journal

Page 17 Post.

Ref.

Debit 5,309.00

Credit

8 - 72

Record Payables to Make DR = CR

General Journal

Date 2005 Oct.

Description 14 Salary Expense Employees’ Federal Income Tax Payable Employees’ State Income Tax Payable FICA Tax Payable Salaries Payable Payroll Register for Week Ended October 14, 2005 —page 72 Page 17 Post.

Ref. Debit Credit 5,309.00

533.00

63.96

217.92

4,494.12

8 - 73

Journalize Cash Payments to Employees

General Journal

Date 2005 Oct.

Description 14 Salary Expense Employees’ Federal Income Tax Payable Employees' State Income Tax Payable FICA Tax Payable Salaries Payable Payroll Register for Week Ended October 14, 2005 —page 72 14 Salaries Payable Cash —Payroll Bank Account Paid wages for week ended Oct. 14, 2005 Page 17 Post.

Ref. Debit Credit 5,309.00

533.00

63.96

217.92

4,494.12

8 - 74

Chapter Eight - North Seattle College

Transcript Chapter Eight - North Seattle College

Chapter Eight

Employee Earnings and Deductions

Performance Objectives

Performance Objectives

Employer Requirements

Required Payroll Records

Calendar Year

Employees and Independent Contractors

Objective 1

Laws Affecting Employees’ Pay Deductions

Laws Affecting Employees’ Pay Deductions

Laws Affecting Employer’s Payroll Tax Contributions

FICA Taxes

State Unemployment Tax Act (SUTA)

Federal Unemployment Tax Act (FUTA)

Workers’ Compensation Laws

Payment Periods

Earnings

Performance Objective 2

Payroll

Time Card

Calculate Hourly Wages and Overtime

Calculate Hourly Overtime for Salary

Piece Rate

Commission

Deductions from Total Earnings

Employees’ Federal Income Tax Withholding: Employer Requirements

Basis of Federal Income Tax Withholding

Employee’s Withholding Allowance Certificate (Form W-4)

Circular E

Wage-Bracket Tax Tables

Using the Tables to Determine Deductions

State Income Tax Withholding

FICA Taxes

FICA Taxes

Calculating FICA Taxes

Calculating FICA Taxes

Calculating FICA Taxes

Calculating FICA Taxes

Calculating FICA Taxes

Calculating FICA Taxes

Unemployment Taxes

Performance Objective 4

Payroll Register

Payroll Register for Week Ended: October 7, 2005

Calculate Deductions

Performance Objective 5

Journalize the Payroll Entry from a Payroll

Register

Payroll Journal Entry: Expenses

Payroll Journal Entry: Expenses and Payables

Payroll Journal Entry

Paying Employees from Regular Checking Account

Paycheck

Payroll Bank Account

Journal Entry for Paying Employees from Payroll Bank Account

Performance Objective 6

Employee’s Individual Earnings Record

Employee’s Individual Earnings Record

Demonstration Problem

Look to Beginning Earnings to Determine If There Are Taxable Earnings

Calculate Ending Cumulative Earnings

Calculate Taxable Earnings

Calculate Deductions

Calculate Payments and Expense

Make Journal Entry from Register

Record Salary Expense

Record Payables to Make DR = CR

Journalize Cash Payments to Employees

Directory