Payroll fundamentals presentation
Transcript of Payroll fundamentals presentation
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Payroll FundamentalsPart 2For audio, dial 800-377-0237 access code 4114422
Presenter
Debbie Mathewson, CPP, CTT+Senior Learning [email protected] x4422
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Housekeeping Tips
Questions
‒ Incoming audio in “mute” mode
‒ Use the Q&A feature to submit questions
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Session Materials
PrintOpen soft copy or print pages 41 through 56
Session Handouts
Handouts needed for class: Payroll Fundamentals Book 2014.pdf
2014 IRS Publication 15
– Download – have open in a separate window
Interactive Tools
Feedback feature
Polling feature
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Objectives
Calculate Social Security & Medicare Taxes
Determine what compensation is taxable
Calculate employee wages from gross to net
Explain Federal tax depositing and filing requirementsrequirements
Workbook Page 2
Part 1 Review
Answer the following polls…
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Social Security & Medicare
Social Security wage limit for 2014:
$117,000
Social Security rate:
6.2%6.2%
Medicare Tax rate:
1.45%
Workbook Page 16
Payroll Deductions Practice
Page 16 - Example 1:
Mike is paid $900 in federal taxable wages every two
weeks, is married and claims 2 withholding
allowances. Using the wage bracket method for
federal income tax withholding calculate Mike’s netfederal income tax withholding, calculate Mike’s net
pay.
Taxable biweekly wages: $ 900.00
Payroll Deductions Practice
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Payroll Deductions Practice
Example 1:
Mike is paid $900 in federal taxable wages every two weeks, is married and claims 2 withholding allowances. Using the wage bracket method for federal income tax withholding, calculate Mike’s net pay.
Taxable biweekly wages: $ 900.00
Federal income tax withheld: $ -28.00
Social security tax withheld: $ -55.80
Medicare tax withheld: $ -13.05
Net pay: $ 803.15
Payroll Deductions Practice
Page 16 - Example 2:
Sue earns an annual salary of $62,000, is paid
weekly and on her W-4, she claims single with two
withholding allowances. Using the percentage
method for federal income tax withholding calculatemethod for federal income tax withholding, calculate
the net pay of her weekly paycheck.
Taxable weekly wages: $1,192.31 ($62,000 ÷ 52
weeks)
Percentage Method Practice
$76.00 x two withholding allowances = $152.00$1,192.31 - $152.00 (2 withholding allowances)= $1,040.31 (subject wages)
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Percentage Method Practice
$1,040.31 - $753 = $287.31 X 25% = $71.83 + $97.75 = $169.58
Payroll Deductions Practice
Page 16 - Example 2:
Sue earns an annual salary of $62,000, is paid weekly and on her W-4, she claims single with two withholding allowances. Using the percentage method for federal income tax withholding, calculate the net pay of her weekly paycheck.
T bl kl $1 192 31 ($62 000 ÷ 52 k )Taxable weekly wages: $1,192.31 ($62,000 ÷ 52 weeks)
Federal income tax withheld: $ - 169.58
Social security tax withheld: $ - 73.92
Medicare tax withheld: $ - 17.29
Net pay: $ 931.52
Calculation Practice
Work on Practice Question #1 on Page 17
– Change your feedback color to purple when you’re done.
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Calculation Practice - Answer
1. 48 hours x $15.48 = $743.048 hours x $15.48 x .5 = $61.92$743.04 + $61.92 = $804.96 (Gross Pay)
2. Federal Income Tax Withheld = $56Wage Bracket (page 49 of IRS Publication 15)Weekly/Married/2 withholding allowancesWeekly/Married/2 withholding allowances
3. $804.96 x 6.2% = $49.91 (Social Security Tax)4. $804.96 x 1.45% = $11.67 (Medicare Tax)5. $804.96 x 2.25% = $18.11 (State Income Tax)6. $804.96 x 1.0% = $8.05 (City Income Tax)7. Line 1 – (Lines 2 through 6) = $661.22
Taxable Compensation
Determining Taxable Compensation Taxable Fringe Benefits
– Personal use of a company car
– Gift certificates
Company paid vacation– Company paid vacation
– Amount of benefit defined as its Fair Market Value
– What it would cost an individual in an Arm’s Length Transaction
– When added to an employee’s earnings, it’s known as Imputed Income
Workbook Page 18
Taxable Compensation
Determining Taxable Compensation
Imputed Income
Group Term Life Insurance
– Taxable in excess of $50,000
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Taxable Compensation
Determining Taxable CompensationNontaxable Fringe Benefits
– Working condition fringe benefits
– Certain moving expenses
– Qualified employee discounts
– De minimis fringes
– Dues and membership fees
– On-premises athletic facilities
Taxable Compensation
Example on page 19 – John
Regular Wages $2,500Imputed Income $1,800Total Taxable Wages $4,300
After the taxes are calculated on the total taxableAfter the taxes are calculated on the total taxable
wages, what will happen to the imputed income
amount?
It will be subtracted before his net pay is calculated.
Taxable Compensation
Determining Taxable CompensationVoluntary Deductions
Pretax Deductions
For Health, Life, and Disability Insurance
– Deferred Compensation Plans
401(k) Contribution limit for 2014 = $17,500
Catch-up Provision allows for an additional $5,500
– Cafeteria Plans
Allow employees to select from two or more benefits
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Work on Practice Question #2 on Pages 21-22
– Change your feedback color to green when you’re done.
Calculation Practice
Calculation Practice #2 - Answer
Tom’s Federal Taxable Wages (Page 21 Line #3)
1. $5,192.31
2. $ 467.31
3. $5,192.31 - $467.31(401k) - $200(pretax health insurance +$2,475 (car lease value) =$ , ( )
$7,000.00 (Federal Taxable Wages)
Calculation Practice #2 - Answer
Federal Income Tax Withheld – Page 41 of the IRS Publication 15
$151.90 x four withholding allowances = $607.60$7,000 - $607.60 = $6,392.40
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Federal Income Tax Withheld – Page 43 of the IRS Publication 15
Calculation Practice #2 - Answer
$6,392.40 - $6,050 = $342.40 X 28% = $95.87 + $1,112.55 = $1,208.42
Calculation Practice #2 - Answer
Tom’s Net Pay
1. $5,192.31
2. $ 467.31
3. $7,000.00
4. $1,208.42
5. $ 245.00 ($7,000 x 3.5%)
6. None
7. $ 0
8. $7,467.31 ($5,192.31 - $200 + $2,475)
9. $ 108.28 ($7,467.31 x 1.45%)
10. Net Pay - $2,963.30
Biweekly salary $5,192.31
Imputed car value + $2,475.00
Gross earnings = $7,667.31
FIT - $1,208.42
SIT - $ 245.00
Social Security - $ 0
Calculation Practice
y $
Medicare - $ 108.28
Health Insurance - $ 200.00
401(k) contribution - $ 467.31
Imputed car value - $2,475.00
= $2,963.30
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Depositing & Reporting Taxes
Principle of Constructive Receipt
Check Date
Federal Tax Deposit Rules
Two deposit frequencies are monthly and
semiweeklysemiweekly
Frequency based on a lookback period
Workbook Page 23
Lookback Period
Federal Tax Deposit Rules
Example:
– For tax year 2014, the lookback period is:
– July 1, 2012 through June 30, 2013
Employer’s 941 Liability $50,000 or less:
– Deposit frequency will be monthly
Employer’s 941 Liability greater than $50,000:
– Deposit frequency will be semiweekly
Workbook Page 23
Big Time Java’s 2014 Lookback Liability – Pg. 24
Lookback Period
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Big Time Java’s 2014 Deposit Frequency – Pg. 24
Lookback Period
Lookback Period
Example – Big Time Java, Inc.
2014 Lookback Period
3Q12 Liability - $13,000
4Q12 Liability - $15,000
1Q13 Liability - $13,000
2Q13 Liability - $13,000
Total Liability - $54,000
What is Big Time Java’s assigned deposit frequency for 2014?
Semiweekly
Workbook Page 24
Depositing & Reporting Taxes
Federal Tax Deposit Rules
Next Day Deposit Rule
– If an employer’s tax liability reaches $100,000,
Must be deposited by next banking day
F d l D it D D tFederal Deposit Due Dates
Workbook Page 24
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Deposit Frequency
Check Date Cutoff Date Due Date
Monthly
Semiweekly
Depositing & Reporting Taxes
Semiweekly
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Semiweekly
Depositing & Reporting Taxes
Semiweekly
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
Semiweekly
Depositing & Reporting Taxes
Semiweekly
Next Day
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Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday
Next Day
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Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Friday
Next Day
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Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Friday 3 banking days following cutoff –usually Wednesday
Next Day
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Friday 3 banking days following cutoff –usually Wednesday
Next Day Any date
Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Friday 3 banking days following cutoff –usually Wednesday
Next Day Any date Same as check date
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Deposit Frequency
Check Date Cutoff Date Due Date
Monthly 1st through the 31st
Last day of the month
15th of the following month
Depositing & Reporting Taxes
Semiweekly Saturday through Tuesday
Tuesday 3 banking days following cutoff date –usually Friday
Wednesday through Friday
Friday 3 banking days following cutoff –usually Wednesday
Next Day Any date Same as check date
Next banking day
Federal Tax Deposit Calendar
www.adp.comInsights & Resources > Tools & Resources > Compliance Resources > Calendars
Depositing & Reporting Taxes
Example 1 – Bob’s Car Repair – Monthly
Depositor
Sept. 5 Liability - $15,000
Sept. 12 Liability - $15,000
Sept 19 Liability $15 000 Sept. 19 Liability - $15,000
Sept. 26 Liability - $15,000
Total Liability for September - $60,000
When will this liability be due? – October 15
Workbook Page 25
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Depositing & Reporting Taxes
Depositing & Reporting Taxes
Example 2 – Gina’s Hair Salon – Semiweekly
Depositor
Friday, May 23 Liability - $53,000
When will this liability be due?
Workbook Page 25
Depositing & Reporting Taxes
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Depositing & Reporting Taxes
Impact of One-Day Rule on Monthly Depositors
$100k liability in a month results in a change to
a semiweekly frequency
Workbook Page 25
Depositing & Reporting Taxes
Example 3 – John’s Hardware Store – Monthly
Depositor
Friday, September 12 Liability - $103,200
When will this liability be due?
Workbook Page 25
Depositing & Reporting Taxes
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Quarter Quarter Ends 941 Due Date
Jan. – Mar. March 31
Depositing & Reporting Taxes
Apr. – June June 30
July – Sept. September 30
Oct. – Dec. December 31
Workbook Page 25
Quarter Quarter Ends 941 Due Date
Jan. – Mar. March 31 April 30
Depositing & Reporting Taxes
Apr. – June June 30
July – Sept. September 30
Oct. – Dec. December 31
Workbook Page 25
Quarter Quarter Ends 941 Due Date
Jan. – Mar. March 31 April 30
Depositing & Reporting Taxes
Apr. – June June 30 July 31
July – Sept. September 30
Oct. – Dec. December 31
Workbook Page 25
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Quarter Quarter Ends 941 Due Date
Jan. – Mar. March 31 April 30
Depositing & Reporting Taxes
Apr. – June June 30 July 31
July – Sept. September 30 October 31
Oct. – Dec. December 31
Workbook Page 25
Quarter Quarter Ends 941 Due Date
Jan. – Mar. March 31 April 30
Depositing & Reporting Taxes
Apr. – June June 30 July 31
July – Sept. September 30 October 31
Oct. – Dec. December 31 January 31
Workbook Page 25
Depositing & Reporting Taxes
Form 944
Filed Annually
For employers whose annual liability is less
than:$1,000
Workbook Page 26
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Federal Unemployment Insurance (FUTA)
Paid by employers
FUTA Tax Rate is: 6.0% on the first $7,000 per employeeCan receive a credit of 5.4%Referred to as the tentative credit
Wh dit i li d FUTA t i 0 6%When credit is applied, FUTA rate is 0.6%
Credit ReductionFor employers in states who cannot pay back a federal
loan IRS announces credit reductions states after November
10 each year
Workbook Page 26
Federal Unemployment Insurance (FUTA)
Depositing and Paying FUTA If quarterly FUTA liability is less than $500, then
liability carries to next quarter
Reporting FUTA TaxR t d ll F 940Reported annually on Form 940
Workbook Page 26
Tax Deposit Practice
Page 27 of the workbook