Chapter Nine Employer Taxes Payments and Reports Performance
- Slides: 61
Chapter Nine Employer Taxes, Payments, and Reports
Performance Objectives 1. Calculate the amount of payroll tax expense and journalize the related entry 2. Journalize the entry for the deposit of employees’ federal income taxes withheld and FICA taxes (both employees’ withheld and employer’s matching share) and prepare the deposit coupon 3. Journalize the entries for the payment of employer’s state and federal unemployment taxes 4. Journalize the entry for the deposit of employees’ state income taxes withheld Accounting Is Fun! 2
Performance Objectives 5. Complete Employer’s Quarterly Federal Tax Return, Form 941 6. Prepare W-2 and W-3 forms and Form 940 7. Calculate the premium for workers’ compensation insurance, and prepare the entry for payment in advance 8. Determine the amount of the end-of-the-year adjustments for (a) workers’ compensation insurance and (b) accrued salaries and wages, and record the adjustments Accounting Is Fun! 3
Chapters 8 and 9: Overview • Chapter 8 – Withhold employees’ taxes – Create liabilities (payables) • Chapter 9 – Pay off those liabilities – Calculate and pay employer taxes Accounting Is Fun! 4
Employer Identification Number • The number assigned each employer by the Internal Revenue Service • Used to submit reports and payments for FICA taxes and federal income tax withheld • Listed on all deposit slips Accounting Is Fun! • Individuals have Social Security numbers • Employers have employer identification number • IRS uses both numbers to track taxes 5
Employer’s Payroll Tax Expense • A general expense account used for recording: – FICA tax (employer’s share) – State unemployment tax (varies by state) – Federal unemployment tax • Paid by employer on behalf of employees Accounting Is Fun! 6
Performance Objective 1 Calculate the amount of payroll tax expense and journalize the related entry Accounting Is Fun! 7
Payroll Tax Components • FICA tax (employer’s share) – Calculate Social Security amount (using 6. 2%, $84, 9000 ceiling) – Calculate Medicare amount (using 1. 45%) • State unemployment tax (SUTA) – Levied only on the employer in most states – Rate varies by state (book assumes 5. 4%, $7, 000 ceiling) – Pays subsistence benefits to unemployed workers • Federal unemployment tax (FUTA) – Levied only on the employer – Rate varies (book assumes 0. 80%, $7, 000 ceiling) – Used to administer federal unemployment fund Accounting Is Fun! 8
Calculate Payroll Tax Expense • Take taxable amounts directly from payroll register • FICA tax (employer’s share) • State unemployment tax (varies by state) • Federal unemployment tax Accounting Is Fun! 9
Calculate Payroll Tax Expense Do not use calculated amounts from employee’s deductions. You must take totals and recalculate amounts. (As a result there may be rounding differences. ) Accounting Is Fun! 10
Journalize Payroll Tax Expense Entry • Payroll taxes are an expense of doing business • Debit Payroll Tax Expense • Credit associated payable account Accounting Is Fun! 11
T-Accounts: Beginning Balance from employees’ deductions Accounting Is Fun! 12
T-Accounts: Employer’s FICA Accounting Is Fun! 13
T-Accounts: Employer’s SUTA Accounting Is Fun! 14
T-Accounts: Employer’s FUTA Accounting Is Fun! 15
T-Accounts: Total Payroll Tax Expense, journalized and posted Accounting Is Fun! 16
To Summarize Accounting Is Fun! 17
1. Record Current Period Payroll in Payroll Register Accounting Is Fun! 18
2. Based on Payroll Register, Make Journal Entry for Employee Salary/Wages Expense Accounting Is Fun! 19
3. From Taxable Earnings Columns of Payroll Register, Calculate and Journalize Payroll Tax Expense Accounting Is Fun! 20
4. Journalize Cash Payments to Employees Accounting Is Fun! 21
Performance Objective 2 Journalize the entry for the deposit of employees’ federal income taxes withheld and FICA taxes (both employees’ withheld and employer’s matching share) and prepare the deposit coupon Accounting Is Fun! 22
Federal Tax Deposits • Include combined total of: – Employees’ federal income taxes withheld – Employees’ FICA taxes withheld – Employer’s share of FICA taxes • Made to authorized commercial or Federal Reserve banks and forwarded to U. S. Treasury • Timing depends on amounts owed (the more you owe, the more often you pay) Accounting Is Fun! 23
Prepare the Deposit Coupon Accounting Is Fun! 24
Journal Entry for Payments of FICA and Federal Income Tax Withholdings • Reduces payables (liabilities) • Reduces Cash • Leaves payable accounts with zero balances after posting Accounting Is Fun! FICA Tax Payable DR - CR + 4, 824. 96 0. 00 Employees' Federal Income Tax Payable DR - CR + 6, 478. 00 0. 00 25
Performance Objective 3 Journalize the entries for the payment of employer’s state and federal unemployment taxes Accounting Is Fun! 26
Payments of State Unemployment Tax (SUTA) • Usually paid quarterly • Due by the end of the month following the end of the quarter (same as Form 941) • After posting, the payable account has a zero balance • Journal entry looks like this: Accounting Is Fun! 27
Payments of Federal Unemployment Tax (FUTA) • Calculated quarterly (due dates same as form 941) – If liability > $100, funds are submitted with deposit card • After posting, the payable account has a zero balance • Journal entry looks like this: Accounting Is Fun! 28
Performance Objective 4 Journalize the entry for the deposit of employees’ state income taxes withheld Accounting Is Fun! 29
Deposits of Employees’ State Income Tax Withholding • Deposited quarterly (due dates same as SUTA) • After posting, the payable account has a zero balance • Journal entry looks like this: Accounting Is Fun! 30
Performance Objective 5 Complete Employer’s Quarterly Federal Tax Return, Form 941 Accounting Is Fun! 31
Form 941 (Employer’s Quarterly Federal Tax Return) • A quarterly report showing the tax liability for withholdings of employees’ federal income tax and FICA taxes and the employer’s share of FICA taxes; total tax deposits made in the quarter are also listed on Form 941 • Due April 30, July 31, October 31, January 31 • See textbook for example Accounting Is Fun! 32
Quarters • Three consecutive months – Also referred to as calendar quarters Accounting Is Fun! 33
Performance Objective 6 Prepare W-2 and W-3 forms and Form 940 Accounting Is Fun! 34
Form W-2 (Wage and Tax Statement) • Form containing information about employee earnings and tax deductions for the year • After last day of calendar year, employer must complete and furnish employee with at least two copies (before January 31) • One copy to the Social Security Administration • One copy to state (if appropriate) • Two or more copies to employee for: – Employee’s records – Employee to send to IRS – Employee to send to state and local tax agencies if those taxes withheld • One copy for employer’s records Accounting Is Fun! 35
Accounting Is Fun! 36
Form W-3 (Transmittal of Wage and Tax Statements) • Annual report (due Feb. 28) sent to Social Security Administration listing: – Total wages and tips – Total federal income taxes withheld – Total Social Security and Medicare taxable wages and taxes withheld • Must attach Copy A of employees’ W-2 forms • Total amounts must match grand total of W-2 and four quarterly 941 forms Accounting Is Fun! 37
Accounting Is Fun! 38
Form 940 (Employer’s Annual Federal Unemployment Tax Return) • Due Jan. 31, or Feb. 10 if payments made in full • Lists: – Total wages paid to employees – Total wages subject to federal unemployment tax – Total federal unemployment tax – Other information Accounting Is Fun! 39
Accounting Is Fun! 40
Performance Objective 7 Calculate the premium for workers’ compensation insurance, and prepare the entry for payment in advance Accounting Is Fun! 41
Workers’ Compensation Insurance • Provides benefits for employees injured or killed on the job • Rates vary according to the degree of risk inherent in the job • Plans may be sponsored by states or by private firms • Employer pays premium in advance, based on estimated payroll for the year • Rates are adjusted after exact payroll is known Accounting Is Fun! 42
Calculate the Premium in Advance Accounting Is Fun! 43
Prepare the Entry for Payment in Advance Accounting Is Fun! 44
Calculate Exact Premium at End of Year Accounting Is Fun! 45
Performance Objective 8 a Determine the amount of the end-of-theyear adjustment for worker’s compensation insurance, and record the adjustment Accounting Is Fun! 46
Calculate Unpaid Premium and Make Adjusting Entry $3, 653. 00 Total exact premium $3, 595. 50 Less total estimated premium paid $57. 50 Additional premium owed Accounting Is Fun! 47
Performance Objective 8 b Determine the amount of the end-of-theyear adjustment for accrued salaries and wages, and record the adjustment Accounting Is Fun! 48
Year-end Adjustments for Accrued Salaries and Wages • Are there adjusting entries for wages expense and wages payable? – Yes, salaries and wages accrue between the last payday and the end of the year • Are there adjusting entries for FICA, federal income tax withholdings, or payroll taxes? – No – These taxes are not legal obligations until employees are paid Accounting Is Fun! 49
Demonstration Problem Accounting Is Fun! 50
Look to Beginning Earnings to Determine If There Are Taxable Earnings Accounting Is Fun! 51
Calculate Ending Cumulative Earnings Accounting Is Fun! 52
Calculate Taxable Earnings Accounting Is Fun! 53
Calculate Deductions Accounting Is Fun! 54
Calculate Payments and Expense Accounting Is Fun! 55
Make Journal Entry from Register Payables Accounting Is Fun! Expense 56
Record Salary Expense Accounting Is Fun! 57
Record Payables to Make DR = CR Accounting Is Fun! 58
Calculate Payroll Taxes Accounting Is Fun! 59
Record Payroll Expense Accounting Is Fun! 60
Journalize Cash Payments to Employees Accounting Is Fun! 61
- Performance based payments vs. milestone payments
- How do informational reports and analytical reports differ
- Chapter 2 income benefits and taxes
- Chapter 14: taxes and government spending section 1
- Unit 4 chapter 11 careers and taxes answers
- Chapter 23 understanding income and taxes
- Chapter 14 taxes and government spending
- Cffa finance formula
- Chapter 14 taxes and government spending
- Terms review 9-4 accounting
- Deferred tax asset journal entry
- Chapter 19 intermediate accounting
- Responsibility accounting performance reports
- Sizing
- Analyzing financial performance reports
- State and local taxes and spending
- Payroll tax journal entry
- What is the theme of the ninny
- Ucas reference example
- Singapore largest employer
- Employer employee insurance
- Employer-employee relationship
- Purpose of human resource management
- Manpower inventory
- Picture yourself as an employer or an employee
- Cornerstone employer
- Workers rights and responsibilities
- Understand employer organisations
- Esp.employer solutions
- Bates brand wheel for employer brand
- Employer pays principle
- Mindful employer
- Audi employer branding
- Tony nelson's employer
- Responsible employer
- Recognized seasonal employer visa
- Central government accounts rules 1983
- Cycle based testing audit
- Capital acquisition and repayment cycle
- Negotiate with williams and fudge
- Accounting for purchases and cash payments
- Value added tax
- Mm proposition ii with taxes
- How much does wanda earn per hour?
- How many types of taxes are there
- Example of public good
- Classification of taxes
- Elmira city school calendar 2020-2021
- Understanding taxes
- Optimal capital structure
- Mm proposition ii with taxes
- Understanding taxes
- Corrective tax
- Mm proposition ii with taxes
- 3 benefits of paying taxes
- Net operating profit after taxes
- Homemade leverage problems
- Interest tax shield
- Government taxes definition
- Taxes in russia
- Tax shield
- 3 criteria for effective taxes