Preparing Payroll Records

Chapter 13

Paying Employees p. 304 Salary – the money paid for employee

service Pay period – the period covered by a

salary payment Payroll – The total amount earned by all

employees for a pay period Must be reduced by state and federal

taxes and other deductions Payroll records used to:

Record payroll Provide annual records to employees

Preparing Payroll Time CardsLesson 13-1Page 304

Analyzing Time Cards Time cards used as basic source of

information to prepare payroll Omni uses a time clock to record daily arrival

and departure times Look at Rick E. Selby’s time card

Three sections: Morning, Afternoon, Overtime Arrival, lunch, left for the day

Calculating EE Hours Worked1. Calculate regular hours

Departure Time - Arrival Time = Hours Worked 12:01 - 7:55 = 12:00 - 8:00 = 4:00*ROUND TO THE NEAREST QUARTER HOUR

2. Calculate overtime hours3. Total regular hours, Total overtime hours

Calculating EE Total Earnings Total Earnings – total pay due for a pay period

before deductions1. Enter regular rate2. Calculate the regular earningsRegular Hours x Regular Rate = Regular Earnings 88 x $12.00 = $1,056.003. Enter overtime rate (1.5 times regular rate)Regular Rate x 1.5 = Overtime Rate $12.00 x 1.5 = $18.004. Calculate overtime5. Add the amount column to calculate total

earnings

Complete 13-1 WT & OYOPage 307

Determining Payroll Tax Withholding

Lesson 13-2Page 308

Payroll Taxes Payroll Taxes – taxes based on the payroll of a

business Based on employee total earnings Penalty for failure to pay correct taxes when due LIABILITY for employer until payment is made to

the government Employee Income Tax

Business must withhold federal income tax Forwarded periodically to the federal

government State and city income tax can also be withheld

How many of you have a job?

Form W-4o Determines the amount of tax to withhold

EE’s Withholding Allowance Withholding Allowance – a deduction from

total earnings for each person legally supported by a taxpayer, including the employee

Married employee has less withheld than single The more allowances the less tax withheld

EXEMPT – low-income and part-time employees

Fill out a federal W-4 and CT W-4 form

EE Income Tax Withholding Withholding table on page 310 and 311 Different table for various payroll periods

Monthly, semimonthly, biweekly, weekly, and daily

Revised each year Current tax table (http://www.irs.gov/pub/irs-pdf/p15.pdf)

Determine Rick E. Selby’s tax withholding using the table on page 311 then using the website above.

EE Social Security and Medicare Tax Social Security tax – federal tax paid for old-

age, survivors, and disability insurance Medicare tax – federal tax paid for hospital

insurance Tax base – max amount of earnings that can

be taxed (current tax base http://www.ssa.gov/oact/COLA/cbb.html)

Calculating Social Security tax Total SS Tax SS Tax Earnings x Rate = Deduction

$1,137.00 x 6.5% = $73.91

*Amounts taken from Rick E. Selby’s time card on page 306 and page 312

Calculating Medicare tax Total Medicare Medicare Tax Earnings x Tax Rate = Deduction

$1,137.00 x 1.5% = $17.06

*Amounts taken from Rick E. Selby’s time card on page 306 and page 312

Complete 13-2 WT & OYOPage 313

Preparing Payroll RecordsLesson 13-3Page 314

Payroll Register Payroll Register – a business form used to

record payroll information Summarizes the payroll for one pay period

and shows: total earnings payroll withholdings Net pay

Preparing a Payroll Register1. Date (last date of semimonthly payroll) at

top, left of Register2. Date of payment at top, right of Register3. Employee information

1. Number2. Name3. Marital Status4. Number of Allowances

Look at Rick E. Selby on line 5

Preparing a Payroll Register (con’t)

4. Enter earnings from time card1. Regular2. Overtime3. Total

5. Enter Deductions: Fed Income Tax6. Enter Deductions: SS Tax7. Enter Deductions: Medicare Tax8. Enter Deductions: Health Insurance Premiums9. Enter Deductions: Other Deductions (United

Way for RES)

Look at Rick E. Selby on line 5

10. Add deductions in column 9FIT + SS Tax + Medi Tax + Health Ins. + Other = Total

11. Determine Net Pay (total earnings paid after payroll taxes and other deductions)

Total earnings - Total Deductions = Net pay

12. Total, prove, and rule the payroll registerTotal earnings - Total Deductions = Net pay

13. Payroll Checks are written after calculations are verified and a partner approves the payroll. Write the check number in the appropriate column of the register.

Preparing a Payroll Register (con’t)

Employee Earnings Record Quarterly Reports sent to federal and state

government showing EE taxable earnings and taxes withheld from EE earnings Called EE Earnings Record Earnings and deductions for each pay period are

summarized on one line of the EE earnings record

Look at Rick E. Selby’s earnings record on page 316

Preparing an EE Earnings Record1. Date of last day of quarter on top, right2. Enter EE:

1. Number2. Name3. Marital Status4. Withholding Allowances5. Hourly Rate6. SS Number7. Position

3. Fiscal year accumulated earnings

Preparing an EE Earnings Record (con’t)4. Last day of pay period being recorded 5. Enter EE:

1. Earnings2. Deductions3. Net Pay

6. Calculate Accumulated Earnings:Accum Earnings Total Earnings Accum Earnings as of 12/1 + for Pay Per. End = as of 12/15

12/157. Total and prove the earnings for each EETotal Earnings - Total Deductions = Net Pay

Other Notes Net pay calculated in step 7 is

compared to the total of the Net Pay column

Total earnings (not net pay) are added to the previous accumulated earnings amount on the earnings record.

Complete 13-3 WT & OYOPage 318

Preparing Payroll ChecksLesson 13-4Page 319

Payroll Bank Account Entirely separate bank account

Protects & controls payroll payments General bank account check written for

exact payroll amount each pay period & deposited into payroll bank account

Preparing a check for total net pay

1. Check stub FIRST1. Date of check2. Amount from PR Register3. Payable to Payroll Account 0068632744. For: pay period

2. Prepare check and sign

Deposited into payroll checking account

EE’s Payroll Check Information taken from payroll register Similar procedure for preparing personal

checks EE keeps stub for their record