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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
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