Chapter 13 Section 2 Employers Payroll Taxes Accounting

Chapter 13 Section 2 Employer’s Payroll Taxes Accounting II Ms. Alltucker

Employer’s Payroll Taxes �What you will learn: • How to calculate the employer’s FICA taxes. • How to calculate federal and state unemployment taxes. • How to journalize and post employer’s payroll taxes. �Why it is important: • In addition to the amount withheld from employees’ payroll checks, the employer owes taxes based on the weekly payroll. These taxes are liabilities of the business.

Section 1 Review �Journalizing and posting the payroll entry • Records taxes employees are required to pay on their earnings

Employer’s Payroll Taxes �Employers • • pay: Medicare Social Security State unemployment Federal unemployment

Computing Payroll Tax Expenses �Employer’s FICA taxes • Both employee and employer pay FICA taxes • Employer pays FICA taxes using the same percentage as employees—using the gross earnings � 6. 2% social security (maximum taxable limit $84, 900 in 2002) �Payroll clerk checks the accumulated earnings record � 1. 45% Medicare �There is no maximum taxable limit

Federal and State Unemployment Taxes � Based on a percentage of the employees’ gross earnings � Collected to provide funds for workers who are temporarily unemployed � Employer pays BOTH federal and state unemployment taxes � Maximum unemployment 6. 2% on the first $7, 000 • . 8% federal unemployment tax • 5. 4% state unemployment tax • (total 5. 4 +. 8 = 6. 2%)

Journalizing the Employer Payroll Taxes �Payroll tax expense: employer’s payroll taxes are business expenses �Until paid they are liabilities of the business �Accounts used: • • Social Security Tax Payable Medicare Tax Payable Federal Unemployment Tax Payable State Unemployment Tax Payable

Journalizing the Employer Payroll Taxes �Using the payroll register as a source document

Journalizing the Employer Payroll Taxes � Calculations: � Social Security Tax Payable • 1350. 25 *. 062 = $83. 72 � Medicare Tax Payable • 1350. 25 *. 0145 = $19. 58 � Federal Unemployment Tax Payable • 1350. 25 *. 008 = $10. 80 � State Unemployment Tax Payable • 1350. 25 *. 054 = $72. 91 � Payroll Tax Expense • 83. 72 + 19. 58 + 10. 80 + 72. 91 = 187. 01

Journalizing the Employer Payroll Taxes JOURNAL ENTRY

Posting Payroll Taxes to the General Ledger �Refer to page 325 for a review on how to post from the general journal to the general ledger �DON’T FORGET POST REFERENCE NUMBERS

Thinking Critically �What does the FICA require of employers and employees? �Explain why the employer’s payroll taxes are a liability of the business.