Chapter 13Chapter 13Preparing Payroll Records

Preparing PayrollPreparing PayrollSalary- money paid for employees services (pay for hours worked)

Pay Period- period covered by salary payment (every week, every 2 weeks, 2x month, once a month). Omni uses semi-monthly

Payroll- total amount earned by all employees for a pay period (reduced by federal, state taxes and deductions

13.1 Preparing Payroll-13.1 Preparing Payroll-Time CardsTime Cards

Analyzing a Payroll Time Card- used for accurate reporting of time worked

Shows employee #, employee name and pay period

Includes when employee arrives, leaves for lunch, returns for lunch and leaves for the day.

Also includes any additional over time

Calculating Employee Calculating Employee Hours WorkedHours Worked

Calculate total regular hours worked; round to nearest 15 minutes

Calculate overtime hours worked to nearest quarter hour

Add regular hours and overtime hours to determine total hours worked

Calculate Employee Calculate Employee Total EarningsTotal Earnings

Total Earnings- total pay due for a pay period before deductions; sometimes called gross pay

Multiply regular hours by regular rate to find regular earnings

Multiply overtime hours by overtime rate to find overtime earnings

Add together to find total earnings for the pay period

13.1 Review: p. 31513.1 Review: p. 315

Terms Review

Audit Your Understanding #1-4

Work Together #5

On Your Own #6

13.2: Determining 13.2: Determining Payroll Tax Payroll Tax

WithholdingWithholdingPayroll Taxes- taxes based on the payroll of a business

Businesses required by law to withhold certain payroll taxes

Penalty for failure to pay correct payroll taxes

Employee Income Tax- withheld from employee’s total earnings and periodically forwarded to federal government (this is the same for state taxes)

Employee’s Employee’s Withholding AllowanceWithholding Allowance

AKA: W4-required for all employees to be kept on file by employer

Withholding Allowance-a deduction from total earnings for each person legally supported by a taxpayer including the employee- based on marital status and # of withholding allowances

Some Exceptions: some low-income or part-time employees (called exempt) To be exempt: earnings are < $700 or someone else can claim them as a dependent on their tax return

Prepare a W4Prepare a W4

Write Employees name and address, social security # in appropriate boxes

Check marital status

# of withholding allowances

Employee signs and dates

Determining Income Determining Income Tax WithholdingTax Withholding

Amount of income tax withheld is based on employees’ total earnings and marital status- use IRS Table- revised every year

Tables are broken down by payroll period type

Social Security and Social Security and Medicare TaxMedicare Tax

Social Security Tax- federal tax paid for old-age, survivors and disability insurance

Medicare Tax- a federal tax paid for hospital insurance

Both are provided by FICA- Federal Insurance Contributions Act

Both taxes are paid by employer and employee

Social Security tax- calculated by a tax base- max amount of earnings on which a tax is calculated. This text uses 6.5% of earnings up to a max of 65,400.00 per year

Total Earnings * 6.5% Tax Rate = Social Security Tax Deduction

Medicare Tax- This text uses a rate of 1.5% of total earnings

Total Earnings * 1.5% Tax Rate= Medicare Tax Deduction

13.2 Review: p. 32113.2 Review: p. 321

Terms Review

Audit Your Understanding #1-3

Work Together #4-5

On Your Own #6-7

13.3 Preparing Payroll 13.3 Preparing Payroll RecordsRecords

Payroll Register- a business form used to record payroll information such as:

Pay Period Date, Payment Date

Employee Name, Earnings (Reg, OT, Total), Fed Income Tax, SS Tax, Medicare Tax, Health Insurance Deductions*, Other Deductions*, Total Deductions

Net Pay (= Total Earnings-Total Deductions)

Check #

Total, Prove and rule each amount column

Net Pay (= Total Earnings-Total Deductions)

Employee Earnings Employee Earnings RecordsRecords

A business form used to record details affecting payments made to an employee

Form is usually prepared quarterly

Includes: Date (last day of quarter), Employee info, Carry over previous accumulated earnings

Write the Pay Period, Fill in Earnings, Deductions and Net Pay

Update Quarterly Accumulated Earnings and Total/Prove

13.3 Review p. 32613.3 Review p. 326

Terms Review

Audit Your Understanding #1-3

Work Together #4-6

On Your Own #7-9

13.4 Preparing Payroll 13.4 Preparing Payroll ChecksChecks

Payroll Bank Account

Preparing a Check- Fill in Check Stub, Prepare the Check

A check from the general checking account is deposited to replenish the payroll checking account

Employee’s Payroll Employee’s Payroll CheckCheck

Prepare the check by filling in check stub

Check is written for employee’s NET earnings

EFTEFT

Electronic Funds Transfer

Direct Deposit into employee’s bank account

This is for NET pay only

Employee only receives a statement or stub

13.4 Review p.32913.4 Review p.329

Audit Your Understanding

Work Together #4-5

On Your Own #6-7

ApplicationApplication

Application Problems 13.1-13.5