Google Apps (Part 2) Unit 7: Payroll & Deductions
Social Security Percentage
6.2%`
What is the combined rate for FICA taxes?
7.65% (6.2% + 1.45%)
Internal Revenue Service (IRS)
Both the employer and the employee have the responsibility for collecting and remitting withholding taxes to the _______.
How do employers calculate an employee's withholding taxes? (know how to do)
Employer's Calculate Employee Withholding Taxes Using: 1. W-4 Form 2. Tax Tables (IRS Publication 15) 3. Social Security & Medicare Taxes (percentage) 4. State & Local Taxes (varies by state)
Pay-as-you-go
Federal income tax is a ________________, tax which means the amount withheld from gross pay is an estimate using tax tables and does not necessarily represent the total amount owed by the employee at the end of the year.
What is the formula for calculating state income tax?
State Income Tax = Gross Pay x Tax Rate
What does withholding allowances mean?
Withholding allowances are the number of dependents an employee claims on the W-4 Form & kept on file with the employer.
Withholding Allowances
Withholding allowances are the number of dependents an employee claims on the W-4 Form & kept on file with the employer. are the number of dependents claimed by the employee on the W-4 Form. - Authorizes the employer to withhold federal income tax according to the number of allowances/dependents claimed by the employee.
Federal Withholding
Withholding for federal income taxes is called
Social Security
taxes pay for retirement and disability benefits.
Total employee contributions to FICA percentage
15.3%
Medicare provides...
(1.45%) health insurance for people when they reach 65 years old - Employee combined rate of 7.65% (6.2% + 1.45%) - Employer must match the 7.65% withheld from employee earning 15.3% total employee contribution to FICA
Social Security Taxes...
(6.2%) pay for retirement and disability benefits
What are the reasons employers must save payroll records?
(Employer's Must Save Payroll Records) Law requires employers to: - Calculate employee earnings & deductions correctly - Maintain and keep payroll records - Pay employees on time - Pay all taxes withheld from their earnings & file required agencies
Susie is single, and she has claimed one allowance on her W-4. Susie receives a bi-weekly paycheck, and earned $1,080 + $200 overtime during the pay period. Use the tax table (Wage Bracket Method, Single person, Bi-Weekly Payroll Period). How much will be deducted for federal income taxes this pay period?
(In Chart ⇒ Left side is wages at least, less than to find a total of $1,280 and on top the number of allowances withheld is shown for each column.) $1,080 + $200 = $1,280 $109 is Susie's deduction, if she receives a paycheck of $1,280 bi-weekly.
Susie is single, and she has claimed one allowance on her W-4. Susie receives a weekly paycheck, and earned $540 last week. Use the tax table (Wage Bracket Method, Single person, Weekly Payroll Period). How much will be deducted for federal income taxes this pay period?
(on chart) Susie who is single and pays weekly with $540, $43 will be deducted.
What is the maximum social security and Medicare earnings?
*Social Security Max Earnings = $132,900* (Employee/Employer 6.2% = $8,239.80 each) *Medicare Employee Unlimited/Employer to $200,000* (Over $200,000 Employees pays additional 0.9%)
How to find out over time if worker works over 40 hours?
*times the hourly wages by 1.5* then take that amount and times it by the amount of overtime hours then add the answer to the amount your original pay to get overtime pay
Payroll tax deductions include:
- Federal Income Tax - Social Security Tax (6.2%) - Medicare Tax (1.45%) - Some State/Local Income Taxes
Steps to Prepare Payroll: Steps Employers Follow to Prepare Payroll: (don't have to know, just look over)
1. Calculate gross earnings and employee deductions 2. Prepare payroll records/payroll register and employee paychecks 3. Record and maintain accounting in the accounting system
Medicare Percentage
1.45%
What factors is the amount deducted for federal taxes based on? (know for table)
Amount deducted for federal income taxes is based on an employees: - Amount of Money Earned - Marital Status- Married or Single Number of - Exemptions/Dependents Claimed on W-4 Form
What are the consequences for employers and employees who evade paying employment taxes?
Employers - - Are subject to criminal and civil penalties Employees - - Are still responsible to pay income taxes - Are responsible for his/her share of FICA tax - May not qualify for Social Security, Medicare, or unemployment benefits
Social Security Number
Employers send the money to the IRS in the employee's name and __________________.
What are the two ways employers figure income taxes to withhold from an employee's gross pay?
Employers use tax table tot figure income taxes to withhold from an employee's gross pay - Wage Bracket Method Tables- for payroll period, employee marital status, number of withholding allowances, & earnings - Percentage Method- for any number of withholding allowances and any amount of wages.
What does FICA stand for? What is it?
FICA taxes (Federal Insurance Contributions Act of 1935) - a percentage of an employee's gross pay withheld from each paycheck.
What happens if the employer refuses to withhold employment taxes from wages and the IRS is not able to collect these taxes from the employer?
If an employer refuses to withhold employment taxes from wages & the IRS is not able to collect these taxes from the employer, then the *employee is responsible to pay income tax and his/her share of the FICA tax.* FICA = Social Security & Medicare
What is a W-4 called?
It's called the Employee's Withholding Allowance Certificate. (Prior to starting a new job, an employer requires the "new hire" to complete a W-4 Form called the Employee's Withholding Allowance Certificate.)
Explain the difference between a Progressive Tax and a Flat-Rate or Flat Tax.
Most States & Some Cities Levy Their Own Income Taxes: Progressive Tax- is used by most states which base their taxes on the taxable income calculated for federal taxes Flat-Rate Tax or Flat Tax- employees pay the same percentage rate regardless of total income
How do you calculate Net Pay or Take-Home-Pay?
Net Pay = Gross Pay-(Federal Withholding Income Tax + Social Security Tax + Medicare Tax + State/Local Income Tax)
What is Net Pay or Take-Home Pay?
Net Pay or Take-Home Pay- the final amount of the employee paycheck after all taxes and other deductions are withheld from gross earnings.
The employee designates the number of ______________________ claimed on their W-4 form. The employee should understand that the _________________ allowances claimed, the ______________ taxes withheld from earnings per paycheck. The more allowances claimed, the ___________ tax withheld from earnings per paycheck. In 2019, one withholding allowance on an annual basis was ________________.
allowances, fewer, more, less, $4,200 (The employee designates the number of __________allowances______________ claimed on their W-4 form. The employee should understand that the _________fewer__________ allowances claimed, the _____more_________ taxes withheld from earnings per paycheck. The more allowances claimed, the _____less_______ tax withheld from earnings per paycheck. In 2019, one withholding allowance on an annual basis was _______$4,200__________.)
Paycheck & Pay Stub (look over, don't need to know)
employees deposit their paycheck and save the attached check stub for safekeeping and future use
Flat-Rate Tax or Flat Tax
employees pay the same percentage rate regardless of total income
Employers must report _______________________ and _____________________________ withheld from their employers, electronically deposit these taxes to an authorized ________________ or ________________________________ according to Federal Tax Deposit Requirements.
income and employment taxes, bank or financial institution (Employers must report _________income______________ and ______________employment taxes_______________ withheld from their employers, electronically deposit these taxes to an authorized _____bank___________ or _______________financial institution__________________ according to Federal Tax Deposit Requirements.)
Payroll Register
is a form used to record employee gross earnings, subtract tax withholdings and other deductions per pay period to determine the employee paycheck amount.
Progressive Tax
is used by most states which base their taxes on the taxable income calculated for federal taxes
Employers must...
match the amount withheld from employee earnings with equal 15.3% total employee contributions to FICA.
Payroll Taxes
must be withheld from employee's paychecks and sent to a designated government agency. It's The Law!
Medicare
provides health insurance for people when they reach 65 years old.
Employees that don't have taxes withheld nor remit them personally are...
still liable to pay these taxes.
Net Pay or Take-Home Pay (know definition)
the final amount of the employee paycheck after all taxes and other deductions are withheld from gross earnings.
