Chapter 13
Payroll Accounting, Taxes,
and Reports
13-1: Recording a Payroll
• Payroll information for each pay period is
recorded in a payroll register.
• The payroll information for each employee is
also recorded on each employee earnings
record.
• The payroll register and employee earning
records provide all the payroll information
needed to prepare payroll and payroll tax
reports.
13-1: Recording a Payroll
• Payroll registers are similar to a special
journal, because payroll registers use
columns to total debit and credit amounts
needed to journalize a payroll.
• Payroll journal entries are based on the
totals of the Earnings Total column, each
deduction column, and the Net Pay
column.
13-2: Recording Employer
Payroll Taxes
•
Employers must pay taxes to the
government that they have withheld from
employee earnings.
•
Most employers must pay four separate
payroll taxes:
1.
2.
3.
4.
Employer social security tax
Medicare tax
Federal Unemployment tax
State Unemployment tax
Terms
• Federal unemployment tax: A tax used for
state and federal administrative expenses
of the unemployment program.
• State unemployment tax: A state tax used
to pay benefits to unemployed workers.
• Lookback period: The 12-month period
that ends on June 30th of the prior year.
13-2: Recording Employer
Payroll Taxes
• Social security and Medicare are the only
payroll taxes paid by both the employer
and the employees.
• The federal unemployment tax is .8% on
the first $7000.00 that an employee earns.
• The state unemployment tax is 5.4% on
the first $7000.00 that an employee earns.
13-3: Reporting Withholding and
Payroll Taxes
• Each employer who withholds income tax,
social security tax, and Medicare tax from
employee earnings must furnish each
employee with an annual report of these
withholdings.
• Employers are required to furnish Form
W-2 to each employee by January 31st of
the next year.
13-3: Reporting Withholding and
Payroll Taxes
• Four copies (A-D) of Form W-2 are prepared for
each employee.
• Copies B and C are given to the employee, A is
sent to the Social Security Administration, and D
is kept for company records.
• Businesses in states with state income tax must
prepare additional copies of Form W-2 as well.
13-3: Reporting Withholding and
Payroll Taxes
• Each employer is required by law to
periodically report payroll taxes due to the
government.
• Each employer must file a quarterly
federal tax return showing the federal
income tax, social security tax, and
Medicare tax due to the government.
13-4: Paying Withholding and
Payroll Taxes
• Employers must pay to the federal, state,
and local governments all payroll taxes
withheld from employee earnings as well
as the employer payroll taxes.
• Federal unemployment insurance is paid
by the end of the month following each
quarter if the liability amount is more than
$100.