7-1. Unit 7 Employee Earnings Records McGraw-Hill/Irwin Copyright 2006 The McGraw-Hill Companies,...
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Transcript of 7-1. Unit 7 Employee Earnings Records McGraw-Hill/Irwin Copyright 2006 The McGraw-Hill Companies,...
7-1
Unit 7Unit 7
Employee Earnings RecordsEmployee Earnings Records
McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-3
Earnings Records Format
The Employee Earnings Record contains:• payroll history of each employee.• personal information
– address– social security number,– marital status– employee withholding allowances
• Pay rate and rate increases• Job title• Voluntary deductions• Date of termination
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-4
Earnings Records Format
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-5
Earnings Records Format
• Changes in the employee records– Changes in allowances:
• Need a signed W-4, ten days after the effective date of the change.
– Changes in pay/title • Required written authorization from manager/supervisor
– Changes in Voluntary Deductions• Only with written authorization form signed by the
employee
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-6
Earnings Records Format
• The heading is divided into six vertical sections– the ending date of the payroll period,– hours worked, – earnings, – deductions, – net pay, – and year-to-date earnings during the four quarters of the
year.• A single horizontal line is used to record information
for each employee for a payroll period.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-7
Earnings Records Format
• Government and Employee’s Earnings Records – The employee earnings record also has space for entering
total amounts for each quarter and for the year as a whole. – Federal government forms that need quarterly and annual
records are: • W-2 forms• 1099 forms• 940 (FUTA)• 941 (FICA)
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-8
Earnings Records Format
• Government and Employee’s Earnings Records – quarterly and yearly figures are needed for various
state tax reports.• State unemployment• State Disability Insurance • Workers compensation insurance
– These reports are to be retain by the employers for at least 3 years.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-9
Earnings Records Entries
• Payroll Register: – provides the information entered in the employee
earnings records at the end of each payroll period:• hours worked, • earnings, • deductions, • and net pay.
– These items are transferred from the payroll register to the individual earnings records.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-10
Earnings Records Entries
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-11
Near Maximum Taxes
• Social Security Taxes (2005):– Taxable base is the first $87,900. – After the base social security tax is no longer
withheld from the gross earnings or matched by the employer.
• Medicare Taxes (2005):– No taxable base ( all earnings are taxable).
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-12
Near Maximum Taxes
• There are also state taxes that have maximum amounts of taxable earnings.
– Example: • California State Disability Insurance Tax maximum earnings is
$68,829 ( 2004) .– Once a worker earns more than that amount, the SDI tax is no longer
deducted from gross earnings.• Unemployment tax:
– Only the first $7,000 of each employee’s earnings is taxable – Once an employee passes $7,000 in a year, no further unemployment
tax is due for that employee that year.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-13
Using Employee Earnings Records
• Employee earnings records serve the following important purposes:
– provides information needed for payroll reports– Provides information for Federal, state and local tax returns– provides information needed for income tax withholdings, – provides information needed for Social Security and
Medicare withholdings– Management reports– Helps determine when employees reach the taxable wage
base for each
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-14
Using Employee Earnings Records
• They provide the information about their earnings, deductions and net pay.
• Serve as reference to verify information such:– employee’s contact information,– job title, – date employed
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-15
Care in Making Entries
• Although the process of making entries in the employee earnings record is not difficult, it must be done carefully and accurately.
• Errors can easily occur. – Examples:
• writing an amount in the wrong column, • Transposing figures, • and placing information in the wrong earnings record.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-16
Internal Controls
• These controls are designed to ensure:– accuracy, – honesty, – efficiency, – and confidentiality.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-17
Internal Controls
• Internal controls for payroll:– Limit access to payroll records to authorized
personnel. – locked files– records password protected records– set up and enforced confidentiality rules– No new additions without written authorization from
the appropriate manager.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-18
Internal Controls
• Internal controls for payroll:– manager’s written approval for changes in job titles
or rate of pay – Employee written authorization for:
• changes in marital status, • withholding allowances, • and/or voluntary deductions
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-19
INTERNAL CONTROLS
• Internal controls for payroll (cont.):– Independent internal or external auditor for payroll
records– Separation of duties:
• payroll checking account should not be reconciled by the same person who writes the payroll checks.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-20
Unit Summary
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
7-21
Questions?
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.