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Chapter 13Chapter 13Preparing Payroll Records
Preparing PayrollPreparing PayrollSalary- money paid for employees services (pay for hours worked)
Pay Period- period covered by salary payment (every week, every 2 weeks, 2x month, once a month). Omni uses semi-monthly
Payroll- total amount earned by all employees for a pay period (reduced by federal, state taxes and deductions
13.1 Preparing Payroll-13.1 Preparing Payroll-Time CardsTime Cards
Analyzing a Payroll Time Card- used for accurate reporting of time worked
Shows employee #, employee name and pay period
Includes when employee arrives, leaves for lunch, returns for lunch and leaves for the day.
Also includes any additional over time
Calculating Employee Calculating Employee Hours WorkedHours Worked
Calculate total regular hours worked; round to nearest 15 minutes
Calculate overtime hours worked to nearest quarter hour
Add regular hours and overtime hours to determine total hours worked
Calculate Employee Calculate Employee Total EarningsTotal Earnings
Total Earnings- total pay due for a pay period before deductions; sometimes called gross pay
Multiply regular hours by regular rate to find regular earnings
Multiply overtime hours by overtime rate to find overtime earnings
Add together to find total earnings for the pay period
13.1 Review: p. 31513.1 Review: p. 315
Terms Review
Audit Your Understanding #1-4
Work Together #5
On Your Own #6
13.2: Determining 13.2: Determining Payroll Tax Payroll Tax
WithholdingWithholdingPayroll Taxes- taxes based on the payroll of a business
Businesses required by law to withhold certain payroll taxes
Penalty for failure to pay correct payroll taxes
Employee Income Tax- withheld from employee’s total earnings and periodically forwarded to federal government (this is the same for state taxes)
Employee’s Employee’s Withholding AllowanceWithholding Allowance
AKA: W4-required for all employees to be kept on file by employer
Withholding Allowance-a deduction from total earnings for each person legally supported by a taxpayer including the employee- based on marital status and # of withholding allowances
Some Exceptions: some low-income or part-time employees (called exempt) To be exempt: earnings are < $700 or someone else can claim them as a dependent on their tax return
Prepare a W4Prepare a W4
Write Employees name and address, social security # in appropriate boxes
Check marital status
# of withholding allowances
Employee signs and dates
Determining Income Determining Income Tax WithholdingTax Withholding
Amount of income tax withheld is based on employees’ total earnings and marital status- use IRS Table- revised every year
Tables are broken down by payroll period type
Social Security and Social Security and Medicare TaxMedicare Tax
Social Security Tax- federal tax paid for old-age, survivors and disability insurance
Medicare Tax- a federal tax paid for hospital insurance
Both are provided by FICA- Federal Insurance Contributions Act
Both taxes are paid by employer and employee
Social Security tax- calculated by a tax base- max amount of earnings on which a tax is calculated. This text uses 6.5% of earnings up to a max of 65,400.00 per year
Total Earnings * 6.5% Tax Rate = Social Security Tax Deduction
Medicare Tax- This text uses a rate of 1.5% of total earnings
Total Earnings * 1.5% Tax Rate= Medicare Tax Deduction
13.2 Review: p. 32113.2 Review: p. 321
Terms Review
Audit Your Understanding #1-3
Work Together #4-5
On Your Own #6-7
13.3 Preparing Payroll 13.3 Preparing Payroll RecordsRecords
Payroll Register- a business form used to record payroll information such as:
Pay Period Date, Payment Date
Employee Name, Earnings (Reg, OT, Total), Fed Income Tax, SS Tax, Medicare Tax, Health Insurance Deductions*, Other Deductions*, Total Deductions
Net Pay (= Total Earnings-Total Deductions)
Check #
Total, Prove and rule each amount column
Net Pay (= Total Earnings-Total Deductions)
Employee Earnings Employee Earnings RecordsRecords
A business form used to record details affecting payments made to an employee
Form is usually prepared quarterly
Includes: Date (last day of quarter), Employee info, Carry over previous accumulated earnings
Write the Pay Period, Fill in Earnings, Deductions and Net Pay
Update Quarterly Accumulated Earnings and Total/Prove
13.3 Review p. 32613.3 Review p. 326
Terms Review
Audit Your Understanding #1-3
Work Together #4-6
On Your Own #7-9
13.4 Preparing Payroll 13.4 Preparing Payroll ChecksChecks
Payroll Bank Account
Preparing a Check- Fill in Check Stub, Prepare the Check
A check from the general checking account is deposited to replenish the payroll checking account
Employee’s Payroll Employee’s Payroll CheckCheck
Prepare the check by filling in check stub
Check is written for employee’s NET earnings
EFTEFT
Electronic Funds Transfer
Direct Deposit into employee’s bank account
This is for NET pay only
Employee only receives a statement or stub
13.4 Review p.32913.4 Review p.329
Audit Your Understanding
Work Together #4-5
On Your Own #6-7
ApplicationApplication
Application Problems 13.1-13.5
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