8 - 1

2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Employers Tax
The Employers Tax
Responsibilities
Responsibilities
Chapter 8
Chapter 8
8 - 2
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Calculating and journalizing
Calculating and journalizing
employer payroll tax expenses.
employer payroll tax expenses.
Learning Objective 1
Learning Objective 1
8 - 3
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
The employer must calculate and record
The employer must calculate and record
payroll tax expenses as a journal entry.
payroll tax expenses as a journal entry.
An EIN (employer identification
An EIN (employer identification
number) is necessary.
number) is necessary.
Payroll reports must be submitted
Payroll reports must be submitted
on specialized o!ernment forms.
on specialized o!ernment forms.
Tax payments must be paid on due
Tax payments must be paid on due
dates or penalties "ill be incurred.
dates or penalties "ill be incurred.
8 - 4
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
#I$A (#ederal Insurance $ontributions Act)%
#I$A (#ederal Insurance $ontributions Act)%
Employers must match the amount deducted from
Employers must match the amount deducted from
employees& chec's for (ocial (ecurity and )edicare.
employees& chec's for (ocial (ecurity and )edicare.
#I$A * (ocial (ecurity Payable #I$A * (ocial (ecurity Payable
(employee) (employee)
(employer) (employer)
#I$A * )edicare Payable #I$A * )edicare Payable
(employee) (employee)
(employer) (employer)
8 - )
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
induces states to create their
induces states to create their
o"n unemployment prorams
o"n unemployment prorams
allo"s the federal o!ernment
allo"s the federal o!ernment
to monitor state prorams
to monitor state prorams
8 - *
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
#+TA (#ederal +nemployment Tax Act)
#+TA (#ederal +nemployment Tax Act)
The "ae base limit is ,-.///
The "ae base limit is ,-.///
per year for each employee.
per year for each employee.


0.12 #+TA tax
0.12 #+TA tax
*
*
3.42
3.42
normal #+TA tax credit
normal #+TA tax credit


.52 net #+TA tax for federal purposes
.52 net #+TA tax for federal purposes
8 - +
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
(tate rates !ary and are merit based.
(tate rates !ary and are merit based.
6ates are hiher for seasonal employers.
6ates are hiher for seasonal employers.
Each state&s "ae base limit is different.
Each state&s "ae base limit is different.
The lo"est limit in any state is
The lo"est limit in any state is
,-./// per year for each employee.
,-./// per year for each employee.
8 - 8
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(


Accounts Affected
Accounts Affected
$ateory
$ateory
6ules
6ules
Payroll Tax Expense
Payroll Tax Expense
Expense
Expense
7r.
7r.
#I$A * (ocial (ecurity
#I$A * (ocial (ecurity
8iability
8iability
$r.
$r.
#I$A * )edicare
#I$A * )edicare
8iability
8iability
$r.
$r.
(+TA
(+TA
8iability
8iability
$r.
$r.
#+TA
#+TA
8iability
8iability
$r.
$r.
8 - 9
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
Payroll Tax Expense
Payroll Tax Expense
4-9.-9
4-9.-9
#I$A (( Tax Payable
#I$A (( Tax Payable
19/.:0
19/.:0
#I$A )edicare Tax Payable
#I$A )edicare Tax Payable
0-.9;
0-.9;
(+TA Tax Payable
(+TA Tax Payable
;/3.54
;/3.54
#+TA Tax Payable
#+TA Tax Payable
;3.05
;3.05
To record the Auust 13 employer&s payroll
To record the Auust 13 employer&s payroll
tax expense
tax expense
8 - 10
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-1 !he
Learning Unit 8-1 !he
"#$l%yer&s Payr%ll !a'
"#$l%yer&s Payr%ll !a'
"'$ense(
"'$ense(
The follo"in are not deducted
The follo"in are not deducted
from the employees& pay%
from the employees& pay%
*
*
)atchin amounts for #I$A
)atchin amounts for #I$A
*
*
<or'ers& $ompensation Insurance
<or'ers& $ompensation Insurance
*
*
#ederal and (tate +nemployment
#ederal and (tate +nemployment
Insurance (#+TA) = ((+TA)
Insurance (#+TA) = ((+TA)
8 - 11
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Completing the Employers Quarterly
Completing the Employers Quarterly
Federal Tax Return and Deposit
Federal Tax Return and Deposit
Coupon Forms !"# and 8#$!%
Coupon Forms !"# and 8#$!%
and paying tax o&ligations 'or
and paying tax o&ligations 'or
F(C) tax *ocial *ecurity and
F(C) tax *ocial *ecurity and
+edicare% and 'ederal income tax.
+edicare% and 'ederal income tax.
Learning Objective 2
Learning Objective 2
8 - 12
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-2
Learning Unit 8-2
,%r# 941(
,%r# 941(
#orm 94; is the Employer&s
#orm 94; is the Employer&s
>uarterly #ederal Tax 6eturn.
>uarterly #ederal Tax 6eturn.
8 - 13
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-2
Learning Unit 8-2
,%r# 941(
,%r# 941(
It also lists cumulati!e total tax.
It also lists cumulati!e total tax.
#I$A information is separated into
#I$A information is separated into
(ocial (ecurity and )edicare.
(ocial (ecurity and )edicare.
Total ross pay for the ?uarter is listed.
Total ross pay for the ?uarter is listed.
8 - 14
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-2
Learning Unit 8-2
,%r# 941(
,%r# 941(
)onthly
)onthly
(emi"ee'ly
(emi"ee'ly
8 - 1)
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-2
Learning Unit 8-2
,%r# 941(
,%r# 941(
The
The
look-back period
look-back period
rule !ie"s the
rule !ie"s the
total amount of payroll taxes paid
total amount of payroll taxes paid
the pre!ious year to determine
the pre!ious year to determine
the fre?uency of the deposits.
the fre?uency of the deposits.
The payroll taxes must be deposited in
The payroll taxes must be deposited in
an authorized #ederal 6eser!e @an'.
an authorized #ederal 6eser!e @an'.
#orm 94; must be accompanied by I6(
#orm 94; must be accompanied by I6(
#orm 5;/9. #ederal 7eposit $oupon.
#orm 5;/9. #ederal 7eposit $oupon.
8 - 1*
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-2
Learning Unit 8-2
,%r# 941(
,%r# 941(
The total time period spans three years.
The total time period spans three years.
1//1
1//1
1//:
1//:
1//4
1//4
This is the loo'Abac' period for 1//4.
This is the loo'Abac' period for 1//4.
Buly ;. 1//1
Buly ;. 1//1
Bune :/. 1//:
Bune :/. 1//:
8 - 1+
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
,reparing Forms -./0 -.10
,reparing Forms -./0 -.10
and !"$2E30 and estimates
and !"$2E30 and estimates
o' 4or5ers compensation
o' 4or5ers compensation
insurance premiums.
insurance premiums.
Learning Objective 3
Learning Objective 3
8 - 18
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-3 ,%r#s
Learning Unit 8-3 ,%r#s
--2, --3, an. 940-"/(
--2, --3, an. 940-"/(
The oriinal copy is mailed to the
The oriinal copy is mailed to the
(ocial (ecurity Administration.
(ocial (ecurity Administration.
Employers prepare a <*1 form
Employers prepare a <*1 form
for each employee for the year.
for each employee for the year.
Banuary :; is the deadline
Banuary :; is the deadline
for issuance to employees.
for issuance to employees.
-2/
-21
8 - 19
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-3 ,%r#s
Learning Unit 8-3 ,%r#s
--2, --3, an. 940-"/(
--2, --3, an. 940-"/(
Employers "ith employees in more
Employers "ith employees in more
than one state must use #orm 94/.
than one state must use #orm 94/.
#orm <A: (
#orm <A: (
Transmittal of Income
Transmittal of Income
and Tax Statements
and Tax Statements
) is mailed
) is mailed
"ith the oriinal copy of the <A1s.
"ith the oriinal copy of the <A1s.
#orm 94/AEC% Employer&s Annual
#orm 94/AEC% Employer&s Annual
+nemployment Tax 6eturn is used
+nemployment Tax 6eturn is used
to report #+TA for one state.
to report #+TA for one state.
8 - 20
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-3 ,%r#s
Learning Unit 8-3 ,%r#s
--2, --3, an. 940-"/(
--2, --3, an. 940-"/(
<or'ers& compensation insurance
<or'ers& compensation insurance
pro!ides insurance aainst losses
pro!ides insurance aainst losses
due to accidental injury on the job.
due to accidental injury on the job.
The premium is based on the
The premium is based on the
total estimated ross payroll.
total estimated ross payroll.
8 - 21
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 8-3 -%r0ers&(
Learning Unit 8-3 -%r0ers&(
1%#$ensati%n 2nsurance(
1%#$ensati%n 2nsurance(
Accounts Affected
Accounts Affected
$ateory
$ateory
6ules
6ules
Prepaid Insurance
Prepaid Insurance
Asset
Asset
7r.
7r.
$ash
$ash
Asset
Asset
$r.
$r.
<or'ers& $ompensation%
<or'ers& $ompensation%
Insurance Expense
Insurance Expense
Expense
Expense
7r.
7r.
Insurance Payable
Insurance Payable
8iability
8iability
$r.
$r.
8 - 22
2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of hapter !
End of hapter !