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Accounting 1Friday, April 21, 2023
• Tony, who works at a furniture store, is paid a salary of $300 a week plus 4% commission of his sales. Tony’s sales last week were $6,120. What was his gross earnings?
Susan RuckerApril 21, 2023Bellwork
Tony’s gross earnings would be [300 + ($6,120 x .04)]
$300 + $244.80 =
$544.80
Accounting 1Friday, April 21, 2023
• Grade Ch12-1 H.W.
• Continue with Ch12-2 Lecture and Assignment.
Section 2Payroll Deductions
Section 2Payroll DeductionsWhat You’ll Learn
Why deductions are calculated and
reported.
How to calculate deductions
required by the federal government.
How to determine voluntary
deductions.
What You’ll Learn
Why deductions are calculated and
reported.
How to calculate deductions
required by the federal government.
How to determine voluntary
deductions.
Why It’s Important
To prepare the payroll accurately
and to comply with the law, both
mandatory and voluntary deductions
must be calculated correctly.
Why It’s Important
To prepare the payroll accurately
and to comply with the law, both
mandatory and voluntary deductions
must be calculated correctly.
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Key Terms
deduction
allowance
401(k) plan
Key Terms
deduction
allowance
401(k) plan
Determining Deductions from Gross EarningsDetermining Deductions from Gross Earnings
An amount that is subtracted from
gross earnings is called a deduction.
Deductions include those required
by law and those an employee
wishes to have withheld from
earnings.
An amount that is subtracted from
gross earnings is called a deduction.
Deductions include those required
by law and those an employee
wishes to have withheld from
earnings.
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Deductions Required by LawDeductions Required by Law
Federal Income Tax
Social Security Tax
State and Local Tax
Federal Income Tax
Social Security Tax
State and Local Tax
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Federal Income Tax
Form W-4 (Employee’s Withholding Allowance Certificate ie. p294, Figure 12-3). The amount withheld for federal income taxes depends on three factors:
Federal Income Tax
Form W-4 (Employee’s Withholding Allowance Certificate ie. p294, Figure 12-3). The amount withheld for federal income taxes depends on three factors:
the employee’s marital status
the number of allowances claimed by the employee
the employee’s gross earnings
the employee’s marital status
the number of allowances claimed by the employee
the employee’s gross earnings
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Federal Income Tax con’t.In Form W-4 the employees lists the number of allowances claimed.
An allowance reduces the amount of income tax to be withheld.
The greater the number of allowances claimed by a taxpayer, the lower the amount of income tax withheld from earnings.
A taxpayer is allowed one personal allowance and one allowance for each person the taxpayer supports, such as a child or an elderly parent.
Refer to tax tables on p295.
Federal Income Tax con’t.In Form W-4 the employees lists the number of allowances claimed.
An allowance reduces the amount of income tax to be withheld.
The greater the number of allowances claimed by a taxpayer, the lower the amount of income tax withheld from earnings.
A taxpayer is allowed one personal allowance and one allowance for each person the taxpayer supports, such as a child or an elderly parent.
Refer to tax tables on p295.
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Social Security TaxThere are two FICA taxes: social
security and Medicare. The tax rates are as follows (as of 2002):
Social security tax 6.20%
Medicare tax 1.45%
Total FICA taxes 7.65%
(Deducted from each employee’s earnings until the maximum taxable earnings amount for the year is reached. This amount increases each year.)
Social Security TaxThere are two FICA taxes: social
security and Medicare. The tax rates are as follows (as of 2002):
Social security tax 6.20%
Medicare tax 1.45%
Total FICA taxes 7.65%
(Deducted from each employee’s earnings until the maximum taxable earnings amount for the year is reached. This amount increases each year.)
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
State and Local Income TaxesState and Local Income Taxes
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
In some states and cities, the tax
rates are set as a percentage of
gross earnings.
In others, the amounts to be
deducted are indicated on tables
similar to the ones used for federal
income tax.
In some states and cities, the tax
rates are set as a percentage of
gross earnings.
In others, the amounts to be
deducted are indicated on tables
similar to the ones used for federal
income tax.
Voluntary Deductions
Common voluntary deductions include:
Voluntary Deductions
Common voluntary deductions include:
union dues
health insurance payments
life insurance payments
pension and other retirement contributions
credit union deposits and payments
U.S. savings bonds
charitable contributions
union dues
health insurance payments
life insurance payments
pension and other retirement contributions
credit union deposits and payments
U.S. savings bonds
charitable contributions
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
Demo #4
28.87 6.75
24.30 5.68
27.80 6.50
Check Your Understanding p298
Check Your Understanding p298
•Thinking Critically 1&2
•Computing in the Business World
•Problem 12-2 & 12-3
•You will need to read this section so as not to miss any details on taxes. I am sure I did not cover everything.
•Thinking Critically 1&2
•Computing in the Business World
•Problem 12-2 & 12-3
•You will need to read this section so as not to miss any details on taxes. I am sure I did not cover everything.
Section 2 Payroll Deductions (con’t.)Section 2 Payroll Deductions (con’t.)
