Employer Tax Deposits
Federal Income Tax
Social Security Tax
Medicare Tax
EFTPS
Electronic Federal Tax Payment System
Deposit Schedule
-Based on the amount currently owed and the amount reported in the lookback period
-Monthly: amount reported in lookback period was $50,000 or less, due on the 15th of the next month
-Semiweekly: amount reported was more than $50k, due on wednesdays or fridays depending on payday
-
Lookback period
a 4 quarter period ending on June 30 of the preceeding year
Tax Liability
Employee witholdings (income, SS, medicare)
Employers matching amounts of SS and Medicare withheld from employees
Paying Tax
Debit Payroll Tax Expense
Credit Payroll Liability Account
Record Tax Deposit
Debit Tax Payable
Credit Cash
Limits
SS - 142,800
FUTA/SUTA - 7,000
Form 941
preprinted government form used by the employer to report payroll tax information relating to ss, medicare, income tax withholing to the IRS
due date: the last day of the following month
If employer didnt deduct enough taxes from employees earnings
the business pays the difference.
Debit Payroll Tax Expense
W-2
aka withholding statment
contains info on employees earnings and tax withholdings for the year
copies:
1. SSA
2. Employee Fed Tax Return
3. Employee Records
4. Employer Records
5. Employee State Tax Return
6. Employer State Tax
W-3
submitted with w2s to the SSA
reports totals of all taxes (the sum of all w2s)
Experience Rating System
a system that rewards an employer for maintaining steady employment conditions by reducing the firms state unemployment tax rate
aka merit rating system
Record employers unemployment payroll taxes
Debit Payroll Tax Expense
Credit Federal/State Unemp Tax Payable
Payment of Unemp
Debit Unemp Tax Payable
Credit Cash
Fed Unemp Tax
If less than 500, no deposit is due, but will be due when it accumulates
form 940
annual
Prepaid WC
Debit Prepaid WC Insurance
Credit Cash
Computing WC
Wages/100 x rate
Internal Control: Payroll Operations
- assign highly responsible trained employees to work in payroll operations
- keep payroll records in secure location
- make all changes in employee pay rates only with proper written authorizations
- make withholding changes based on W4
- deductions have to be authorized by employee
- payroll authorizations examined by someone other than who prepares them
- someone else distribute checks
- someone else reconcile payroll
- prompt bank reconciliation
- maintain files of all authorization forms
