LESSON 13-4LESSON 13-4

Paying Payroll Taxes and Unemployment Taxes

PROCESSPROCESS

Record Employee Payroll Taxes Salary Expense Federal Income, Social Security, Medicare & Deductions (UW)

Record Employer Payroll Taxes Payroll Tax Expense Social Security 6.2%, Medicare 1.45%, Federal

Unemployment .8%, State Unemployment 5.4%

Report ALL taxes to Government Form 941 (quarterly), W3 and W2 (yearly)

Pay ALL Withholding taxes to Government Employee and Employer Payroll Taxes

Record Employee Payroll Taxes – Each Payroll Period

Record Employer Payroll Taxes – Each Payroll Period

WHEN TO PAY GOVERNMENTWHEN TO PAY GOVERNMENT

Payments for taxes to Government: Called a deposit Can be paid by three different methods:

Next banking day after payroll period Semi-weekly Monthly

Two amounts determine frequency of paying government taxes Amount of taxes collected in the current period AND Amount of taxes owed during a prior 12-month period

Large amounts of taxes = payments every few days Low amounts of taxes = payments once a month

Less than $50,000 in previous 4 quarters = monthly

PAYING EMPLOYEE INCOME TAX, SOCIAL PAYING EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAXSECURITY TAX, AND MEDICARE TAX

lookback period: 12-month period that ends on June 30th of the prior yearExamples:

For 2010: twelve-month period ending June 30 of 2009: if <50,000 monthly depositor

PROCESSPROCESS

Record Employee Payroll Taxes – Each Payroll Federal Income, Social Security, Medicare

Record Employer Payroll Taxes – Each Payroll Social Security 6.2%, Medicare 1.45%, Federal

Unemployment .8%, State Unemployment 5.4%

Report taxes to Government – Quarterly/Yearly Form 941 (quarterly) – By end of month following quarter

W3 and W2 (yearly)

Pay Withholding taxes to Government Pay both employee and employer taxes Pay payroll taxes by 15th of next month Pay unemployment taxes - by end of month following each quarter

NEW EMPLOYERSNEW EMPLOYERS

New Employers: Monthly schedule depositors for the first year of business New employers fill out the 8109 coupon book

Calculating Payroll TaxCalculating Payroll Tax

What accounts are impacted and how?

Do Payables Increase or Decrease?

When Paid?

January 15. Check No. 347.Paid cash for liability for employee income tax, for the month of December. Refer to your General Journal and Payments Journal for your numbers to complete this.

DEC15th Dec 31st Total

Employee Income Tax for December

Total Employee Income Tax

Social security tax for employee

Social security tax for employer

Total Social Security

Medicare tax for employee

Medicare tax for employer

Total Medicare

Total Payroll Tax Paid for the Month of December:

Dec 31st: Total fed: $383, SS $351.39, Medicare $82.17

JOURNALIZING EMPLOYEE PAYROLL TAXESJOURNALIZING EMPLOYEE PAYROLL TAXES

              Page: 15

DateCk No

Post.Ref

GeneralAccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

                 

                 

                 

                 

January 15. Paid cash for liability for month of December employee income tax, $764.00; social security tax, $1411.00; and Medicare tax, $330.00; total, $2,505. Check No. 347. (employee and employer taxes)

COUPON 8109, COUPON 8109, FEDERAL DEPOSIT COUPONFEDERAL DEPOSIT COUPON    Cash Payments Journal           Page:  4

Date Account TitleCk No

Post.Ref

GeneralAccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

 Jan 15 Employee Income Tax Payable 347   764.00        2505.00     Social Security Tax Payable    1411.00             Medicare Tax Payable     330.00        

                   

2 5 0 5 0 0

JOURNALIZING PAYMENT OF LIABILITY JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAXFOR FEDERAL UNEMPLOYMENT TAX

January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367.

What Journal will you use? When is Unemployment paid? What quarter are we paying for? What accounts are impacted and how?

By end of next month after quarter

Fourth – Oct - Dec

Cash Payments

JOURNALIZING PAYMENT OF JOURNALIZING PAYMENT OF FEDERAL UNEMPLOYMENT TAXFEDERAL UNEMPLOYMENT TAX

January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367.

    Cash Payments Journal           Page:  4

Date Account TitleCk No

Post.Ref

GeneralAccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

 Jan 15 Employee Income Tax Payable 347   764.00        2505.00     Social Security Tax Payable    1411.00             Medicare Tax Payable     330.00        

                   

COUPON 8190 - FEDERAL COUPON 8190 - FEDERAL UNEMPLOYMENTUNEMPLOYMENT

JOURNALIZING PAYMENT OF JOURNALIZING PAYMENT OF STATE UNEMPLOYMENT TAXSTATE UNEMPLOYMENT TAX

January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $233.55. Check No. 368.

    Cash Payments Journal           Page:  4

Date Account TitleCk No

Post.Ref

GeneralAccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

 Jan 15 Employee Income Tax Payable 347   757.00        2505.00     Social Security Tax Payable    1411.00             Medicare Tax Payable     330.00           31  Unemployment Tax Payable – Federal 367    34.60        34.60

COUPON 8109 – STATE UNEMPLOYMENTCOUPON 8109 – STATE UNEMPLOYMENT

PURCHASE SAVINGS BONDSPURCHASE SAVINGS BONDS

What accounts are impacted and how?

Do Payables Increase or Decrease?

January 15. Paid cash for US Savings Bonds for employees, $150.00 C347

Decrease as Debit

February 1. Paid cash for US Savings Bonds for employees, $150.00 C369

RECORD PURCHASE SAVINGS BONDSRECORD PURCHASE SAVINGS BONDS

    Cash Payments Journal           Page:  4

Date Account TitleCk No

Post.Ref

GeneralAccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

 Jan 15 Employee Income Tax Payable 347   764.00        2505.00     Social Security Tax Payable    1411.00             Medicare Tax Payable     330.00           31  Unemployment Tax Payable – Federal 367    34.60        34.60

 31  Unemployment Tax Payable – Federal 368    233.55       233.55

s

TERMS REVIEWTERMS REVIEW

lookback period

REVIEWREVIEW

WTG 13-4

    Cash Payments Journal           Page: 

Date Account TitleCk No

Post.Ref

General

AccountsPayableDebit

Purchases DiscountCredit

CashCreditDebit Credit

 Dec 15  Salary Expense  C315    5650.00             4051.10

         Employee Income Tax Pay          371.00      

         Social Security Tax Pay         350.30      

         Medicare Tax Payable          81.93      

     U.S Savings Bonds       25.00

 Dec 31  Salary Expense  C330   5729.00     4880.23

         Employee Income Tax Pay     385.50      

         Social Security Tax Pay     355.20      

         Medicare Tax Payable     83.07      

     U.S. Savings Bonds       25.00

General Journal Page #  

Date Account Title Doc No.

Post. Ref Debit Credit

Dec 15 Payroll Tax Expense M56 4 7 9 31          

        Social Security Tax Payable          3 5 0 30

           Medicare Tax Payable           8 1 93

           Unemployment Tax Payable - Federal              9 80

           Unemployment Tax Payable- State         3 7 28

Dec 31 Payroll Tax Expense  M63              

        Social Security Tax Payable    4 7 1 06  3 5 5 20

           Medicare Tax Payable          8 3 07

           Unemployment Tax Payable - Federal  8 23

           Unemployment Tax Payable- State 2 4 56