CHAPTER 12 PAYROLL ACCOUNTING Section 12-2 Payroll Deductions Section 12-3 Payroll Records
CHAPTER 12 PAYROLL ACCOUNTING Section 12-2 Payroll Deductions Section 12-3 Payroll Records.
Jan 17, 2016
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CHAPTER 12PAYROLL ACCOUNTING
Section 12-2Payroll Deductions
Section 12-3Payroll Records
• The collection and processing of information needed to begin to prepare and issue payroll checks.
Gross earnings is the total amount an employee earns in a pay period.
A deduction is an amount that is subtracted from an employee’s gross earnings.
Net pay is the total amount that the employee actually receives (gross earnings less deductions).
SECTION SKILLS
PRACTICE
Problem 12-5 (page 333)
3940
39
4337.357.60
286.65338.20
185.00
250.00
37.05 222.05
22.80 272.80
Ann Ryan
Mandatory deductions – deductions required by law
Voluntary deduction – deductions that are optional
DEDUCTIONS
MANDATORY DEDUCTIONS
Federal Income
Tax
SocialSecurity
Tax
City andState Income
Tax
Deductions Required by Law
MANDATORY DEDUCTIONS
The amount of income tax
withheld depends on:
The employee’s marital status(found on Form W-4)
Number of allowances claimed(found on Form W-4)
The employee’s gross earnings
MANDATORY DEDUCTIONS
withholding allowance - An allowance an individual claims on a Form W-4; it is used to calculate the amount of income tax withheld
from an employee’s paycheck.
See page 319
MANDATORY DEDUCTIONS
Look at the Tax Tables shown on page 320
- Separate tables for Single and Married
- Different tables for pay periods
- Reading the tables
MANDATORY DEDUCTIONS
Employer withholds federal income federal income
taxtax
Too much money withheld
Refund
Too little money withheld
Amount Due
from the IRS
to the IRS
State/Local Income tax is similar – employer is required to withhold and forward to the government
MANDATORY DEDUCTIONS
The Federal Insurance Contributions Act (FICA) established social security taxes in 1935. Two
components of FICA are:
Social Security–provided as old age
and disability insurance and
survivors’ benefits
Medicare–provides health insurance for
people who are elderly or disabled
Social Security has an annual maximum; currently the maximum taxable earnings
amount is $106,800.
Currently 6.2%
Currently 1.45%
VOLUNTARY DEDUCTIONS
Examples of Voluntary DeductionsUnion Dues
Health Insurance Premiums
Life Insurance Premiums
U.S. Savings Bonds
Charitable Contributions
Retirement Contributions (401k, etc.)
Credit Union Deposits and Payments
PRACTICE
Problem 12-2 (page 322)
6.2% 1.45% 2%Page 320
9.6511.41
12.6913.4212.2059.37957.56
2.262.67
2.973.142.85
13.88
16.0012.00
23.006.00
057.00
3.113.684.09
4.333.94
19.55
31.0229.7742.7526.88
18.99149.40
124.58154.33161.90
189.52177.82808.16
Double-check by taking the gross total minus total deductions to make sure it equals the net total.
PAYROLL RECORDS
Paying Employees
Two most common methods:
-Paper Check
-Direct Deposit
PAYROLL RECORDS
payroll register - A form that summarizes information about employees’ earnings for each pay period.
1. Total Hours Column
2. Rate Column
3. Earnings Section
4. Deductions Section
5. Net Pay Column
6. Check Number Column
7. Column Totals
See page 323
PAYROLL RECORDS
An employer must also keep an employee’s earning record, which includes
accumulated earnings information.
employee’s earning record – a record prepared for each employee that contains all payroll
information related to the employee; it is kept on a quarterly basis
accumulated earnings - the employee’s year-to-date gross earnings
ASSIGNMENT
• Problem 12-6 (pages 333-334)– Excel – template– Compare with group
• Problem 12-7 (page 334)– Handout– Compare with group
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