Payroll Unit
Terms
Write down as many payroll terms or payroll taxes
that you can think of in 2 minutes.
Ready, Set, Go!
Payroll Pay Periods
• Weekly – 52 checks a year
• Biweekly – 26 checks a year, every other
week
• Semi-monthly – 24 checks a year, usually
on the 1st and 15th
• Monthly – 12 checks a year
How are you paid?
Salary
• Paid a certain
amount of money
each pay period
• Not based on hours
worked
• Usually can not
earn overtime pay
Hourly
• Pay will vary each
pay period
• Pay directly relates
to hours worked
• Can earn overtime
pay
Gross Pay
• Amount before any taxes and/or any other
deductions are taken
• Gross pay = regular + overtime
earnings
earnings
For example: Bryce makes $10.50 per hour
and works 80 hours in 2 weeks. His gross
pay would be:
$10.50 per hour x 80 hours = $840.00
Standard Work Week
Federal Labor Standards Act of 1938
• Established a standard week to be 40 hours
• Amount over 40 hours is eligible for
overtime rate
• Overtime Rate (time and a half) = at least
1.5 times the hourly rate
Time Sheets
• Each employee is given a time card or time
sheets to keep track of hours worked
• Time clock – used to clock in/out and keeps
accurate record of hours worked. Usually
has time card holder next to it.
• Swipe cards are also used for electronic
time records
Payroll Clerk
• Check time for accuracy – addition,
vacation or sick pay
• Total hours worked
• Enter hours into payroll software if not
already entered electronically
Net Pay
Net Pay = Gross Pay – Deductions
• Example deductions: Federal, State, Social
Security, Medicare, City, and any other
insurance
Federal Income Tax Withholding
•
One of the largest deductions
•
Paid to the federal government
•
Amount deducted based on 3 things:
1. Employee’s gross earnings
2. Employee’s filing status
3. Number of withholding allowances claimed
Federal Income Tax Withheld
• Amount of taxes withheld are determined
by using tax tables created by the Internal
Revenue Service (IRS)
http://www.irs.gov/pub/irs-pdf/p15.pdf
Withholdings
• Withholding Allowance (exemption) – is a
portion of gross earnings not subject to tax
• Permitted 1 exemption for himself/herself,
1 for spouse, and 1 for each dependent (child
or elderly parent)
• W-4 must be completed when hired & K-2 for
Kentucky withholding
http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3
State Withholdings
• Calculated using withholding charts
provided by the state
• Based on withholding exemptions claimed
on K-4
http://www.revenue.ky.gov/business/whtax.htm
FICA
• Federal Insurance Contribution Act
• Established by Congress during the
depression in 1930’s
• 1991 Social Security & Medicare funds
were separated into 2 separate programs
• Paid by both employees & employers
FICA cont.
Social Security
• 6.2% for first
$106,800
Medicare
• No maximum income
level
• After a person earns
$106,800 they do
NOT pay in Social
Security tax for the
rest of the year.
• All wages are taxed,
except when employee
participates in flexible
benefits program
Employer’s Payroll Taxes
• Deposit Federal Income Tax withholdings
monthly by the 15th to a local bank Federal
Reserve Bank.
• Large businesses may be required to pay
electronically each pay period
• If employer’s accumulated tax for the
quarter is less than $500, then they can send
payment in with 941-Form.
Employer’s Payroll Taxes
• Pay withholding taxes from employee’s
checks plus employer’s must match FICA
amounts.
• Total Amount Due = Total Federal
Withholding + Employee’s FICA +
Employer’s Matching FICA
FUTA Tax
• Federal Unemployment Tax Act
• Paid entirely by employers, do not affect
paycheck amount
• Unemployment compensation to workers
who have lost their jobs.
FUTA Tax
• Pay on each employee for their first $7,000
earnings each year
Gross FUTA rate
6.2%
Credit for State Unemployment taxes 5.4%
Net FUTA rate
0.8%
SUTA Tax
• State Unemployment Tax Act
• State sets % to each business
• Employer’s pay SUTA, does not affect
payroll check
• Calculated on each employee for the first
$8,000 in earnings every year
Local Taxes
• County and City can each charge additional
payroll taxes
• Glasgow City Taxes = 1.5% of gross pay
• Employee’s pay these taxes
Other Deductions
• Insurance – medical, dental, vision – can be
set up as Cafeteria Plans
• Cafeteria Plans (Sec. 521) – allow insurance
deductions to be taken from gross pay
before other payroll taxes are calculated
• 401K and other Retirement plans
Employer’s Tax Forms
• Form 941 - Federal Withholding
– Due by 15th of each month, or every payroll
– Form due quarterly
http://www.irs.gov/pub/irs-pdf/f941.pdf
• Form 940 - FUTA
– Form due annually
– Pay quarterly if owe over $100, to pay make a
deposit at any Federal Reserve Bank
http://www.irs.gov/pub/irs-pdf/f940.pdf
Employer’s Tax Forms
• K-1 – Kentucky Withholding
– Due quarterly with payment
– K-3 due annually
• Form UI-3 – (SUTA) State Unemployment Tax
– Due quarterly with payment
• Local Taxes
– Due quarterly with payment
Terms
• How many terms did you get right?
• Can you name more in the next 2 minutes?
Go!