Accounting 2 - Chapter 8 Employer Taxes, Payments, and Reports

State the entire definition/everything about the State Unemployment Tax (SUTA).

A tax levied against employers by most states based on a portion of employee earnings during the calendar year. Rates and earnings limits vary among states. The proceeds are used to pay subsistence benefits to unemployed workers.

Federal Unemployment Tax (FUTA)

A tax levied only on the employer that is equal to 0.6 percent of the first $7,000 of total earnings paid to each employee during the calendar year. This tax is used to help administer unemployment funds.

What happens second on the tax calendar?

Jan. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withheld, and employer's FICA taxes for wages paid during December.

What happens third on the tax calendar?

Jan. 31 Complete Employer's Quarterly Federal Tax Return, Form 941, for the fourth quarter.

What happens tenth on the tax calendar?

Mar. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during February.

When is the ending date for the first quarter?

March 31st

When is the due date for forms 941/941e for the third quarter?

October 31st

The federal unemployment tax (FUTA) is paid only by who?

The employer.

Quarter

Three consecutive months.

Form W-2

A form containing information about employee earnings and tax deductions for the year. Also called a Wage and Tax Statement.

Payroll Tax Expense

A general expense account used for recording the employer's portion of the FICA taxes, the federal unemployment tax, and the state unemployment tax.

Form 941

A quarterly report showing the tax liability for withholdings of employees' federal income tax and FICA taxes and the employer's share of FICA taxes. Total tax deposits made in the quarter are also listed on this Employer's Quarterly Federal Tax Return.

Employers submit what?

A return, Form 941, every quarter (three consecutive months).

State Unemployment Tax (SUTA)

A tax levied against employers by most states based on a portion of employee earnings during the calendar year.

Form 940

An annual report filed by employers showing total wages paid to employees, total wages subject to federal unemployment tax, total federal unemployment tax, and other information. Also called the Employer's Annual Federal Unemployment (FUTA) Tax Return.

Form W-3

An annual report sent to the Social Security Administration listing the total wages and tips, total federal income tax withheld, total Social Security and Medicare taxable wages, total Social Security and Medicare tax withheld, and other information for all employees of a firm. Also called the Transmittal of Wage and Tax Statements.

Payroll taxes-like property taxes-are what?

An expense of doing business.

What happens eleventh on the tax calendar?

Apr. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during March.

What happens thirteenth on the tax calendar?

Apr. 30 Complete Employer's Quarterly Federal Tax Return, Form 941, for the first quarter.

What happens fourteenth on the tax calendar?

Apr. 30 Make federal tax deposit for federal unemployment tax liability if it exceeds $500.

What happens fifteenth on the tax calendar?

Apr. 30 Make state deposit for employees' state income tax withholding.

What happens twelfth on the tax calendar?

Apr. 30 Pay state unemployment tax liability for the previous quarter and submit state return, employer's tax report.

When is the due date for forms 941/941e for the first quarter?

April 30th

When is the second quarter?

April-May-June

State a second thing about Form W-2?

At least four copies of the W-2 form are required for each employee.

What is the first thing that the accountant does with workers' compensation insurance.

At the beginning of the year, the firm's accountant computes the estimated annual premium.

What is the second thing that the accountant does with workers' compensation insurance.

At the end of the year, the accountant calculates the exact premium.

What is the third step for recording the payroll entries?

Based on the Taxable Earnings columns of the payroll register, record payroll Tax Expense in the journal.

What is the second step for recording the payroll entries?

Based on the payroll register, record the payroll entry in the journal.

FICA TAXES (the combined Social Security and Medicare taxes) are imposed equally on who?

Both the employer and employees.

How is the employer's share of FICA TAXES for Medicare determined?

By multiplying the employer's tax rates (1.45% or 0.0145) by the taxable earnings up to all earnings.

How is the employer's share of FICA TAXES for Social Security determined?

By multiplying the employer's tax rates (6.2% or 0.062) by the taxable earnings up to a maximum wage limit of $118,500.

What is a seventh example of an internal control?

Compare payroll expense per the payroll register to the actual amounts paid. Also compare amounts to payroll deposits made.

What is a sixth example of an internal control?

Conduct a thorough pre-employment reference check for all payroll personal.

What is a fourth example of an internal control?

Conduct periodic unannounced audits to ensure that all employees on the payroll actually work for the company.

What is the first copy of the W-2 form required for each employee?

Copy A - The employer sends it to the Social Security Administration.

What are all of the copies of the W-2 form required for each employee?

Copy A - The employer sends it to the Social Security Administration. Copy B - The employer gives it to the employee to be attached to the employee's individual federal income tax return. Copy C - The employer gives it to the employee to be kept for his or her personal records. Copy D - The employer keeps this copy as a record of payments made.

What is the second copy of the W-2 form required for each employee?

Copy B - The employer gives it to the employee to be attached to the employee's individual federal income tax return.

What is the third copy of the W-2 form required for each employee?

Copy C - The employer gives it to the employee to be kept for his or her personal records.

What is the fourth copy of the W-2 form required for each employee?

Copy D - The employer keeps this copy as a record of payments made.

State a second thing about workers' compensation insurance.

Coverage is available to employers through private insurance companies, authorized by the state, or state-administered plans.

What is a fifth example of an internal control?

Cross-reference the payroll roster for duplicate addresses or Social Security numbers.

When is the ending date for the fourth quarter?

December 31st

A federal tax deposit includes the combined total of what?

Employees' federal income taxes withheld, Employees' FICA taxes (Social Security and Medicare) withheld, and the Employer's share of FICA taxes (Social Security and Medicare).

Who is required to have an Employer Identification Number?

Employers of one or more persons are required to have such a number, and it must be listed on all reports and payments of employees' federal income tax withholding and FICA taxes.

False wage claim fraud

Extra hours or other relevant factors are added to wage information to increase the amount of pay.

What happens eighth on the tax calendar?

Feb. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during January.

What happens ninth on the tax calendar?

Feb. 28 Complete Transmittal of Wage and Tax Statements, Form W-3, and attach Copy A of W-2 forms for employees.

The January 31st deadline may be extended until when?

February 10th if the employer has made deposits paying the FUTA tax liability in full.

When is Form W-3 due?

February 28th following the end of the calendar year.

Electronic Federal Tax Payment System

Federal tax deposits are made using this system. Payments can be made 24 hours a day, 7 days a week. Businesses can schedule payments up to 120 days in advance of the due date. To be considered on time, tax deposits must be scheduled at least one calendar day prior to the due date.

What happens when wages are accrued for the time between the last payday and the end of the year?

For the accrual adjustment, gross salary and wages are recorded, not the net salary and wages. When the accrued salary and wages are paid, the amounts withheld for the federal and state taxes, FICA taxes, and other deductions are recorded.

Elaborate more about Employer's Quarterly Federal Tax Return (Form 941)?

Form 941-V accompanies the 941 report and payment for any balance due.

State a third thing about workers' compensation insurance.

Generally, the employer pays a premium in advance based on the estimated payroll for the year.

What is a third example of an internal control?

Have employees physically sign and show proper identification to receive their pay checks.

False expense reimbursement fraud

Improper claims are made for the reimbursement of business expenses.

What is workers' compensation insurance also known as?

Industrial accident insurance.

What should be in place to prevent and detect payroll fraud?

Internal controls.

What does a company do with their payroll taxes?

It records the payroll taxes in the Payroll Tax Expense account and debits the account for the company's portion of FICA taxes and for state and federal unemployment taxes.

What does Form W-3 do?

It shows (for all employees) the total wages and tips, total federal income taxes withheld, total FICA Social Security and Medicare taxable wages, total FICA Social Security and Medicare taxes withheld, and other tax-related information.

What does Form 940 do?

It shows total wages paid to employees, total wages subject to federal unemployment tax, and other information.

What happens first on the tax calendar?

Jan. 10 Pay estimated annual premium for workers' compensation insurance. (This is an approximate date, as it varies among the states.)

State the entire tax calendar.

Jan. 10 Pay estimated annual premium for workers' compensation insurance. (This is an approximate date, as it varies among the states.) Jan. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withheld, and employer's FICA taxes for wages paid during December. Jan. 31 Complete Employer's Quarterly Federal Tax Return, Form 941, for the fourth quarter. Jan. 31 Issue Copies B and C of Wage and Tax Statement, Form W-2, to employees. Jan. 31 Pay state unemployment tax liability for the previous quarter and submit state return, employer's tax report. Jan. 31 Pay any remaining federal unemployment tax liability for the previous year and submit Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Jan. 31 Make state deposit for employees' state income tax withholding and submit any required state payroll reports. (Timing and required reports may differ from state to state.) Feb. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during January. Feb. 28 Complete Transmittal of Wage and Tax Statements, Form W-3, and attach Copy A of W-2 forms for employees. Mar. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during February. Apr. 15 Make federal tax deposit for employees' income tax withholding, employees' FICA taxes withholding, and employer's FICA taxes for wages paid during March. Apr. 30 Pay state unemployment tax liability for the previous quarter and submit state return, employer's tax report. Apr. 30 Complete Employer's Quarterly Federal Tax Return, Form 941, for the first quarter. Apr. 30 Make federal tax deposit for federal unemployment tax liability if it exceeds $500. Apr. 30 Make state deposit for employees' state income tax withholding

What happens fourth on the tax calendar?

Jan. 31 Issue Copies B and C of Wage and Tax Statement, Form W-2, to employees.

What happens seventh on the tax calendar?

Jan. 31 Make state deposit for employees' state income tax withholding and submit any required state payroll reports. (Timing and required reports may differ from state to state.)

What happens sixth on the tax calendar?

Jan. 31 Pay any remaining federal unemployment tax liability for the previous year and submit Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

What happens fifth on the tax calendar?

Jan. 31 Pay state unemployment tax liability for the previous quarter and submit state return, employer's tax report.

When is the due date for forms 941/941e for the fourth quarter?

January 31st

When is the first quarter?

January-February-March

When is the due date for forms 941/941e for the second quarter?

July 31st

When is the third quarter?

July-August-September

When is the ending date for the second quarter?

June 30th

State one thing about workers' compensation insurance.

Most states require employers to provide workers' compensation insurance.

State everything about workers' compensation insurance.

Most states require employers to provide workers' compensation insurance. Coverage is available to employers through private insurance companies, authorized by the state, or state-administered plans. Generally, the employer pays a premium in advance based on the estimated payroll for the year. The premium rate varies with the amount of risk the job entails and the company's claims history.

When is the fourth quarter?

October-November-December

EFTPS tax deposits must be processed when?

One calendar day in advance of the tax liability due date to be considered on time and to avoid penalties.

What is a eighth example of an internal control?

Outsource payroll administration.

The proceeds of the state unemployment tax (SUTA), which most states levy only on the employer, are used to do what?

Pay subsistence benefits to unemployed workers.

The state tax is usually paid how?

Quarterly and is due by the end of the month following the end of the quarter (the same as the due dates for Form 941).

The FUTA tax is calculated how?

Quarterly, during the month following the end of each calendar quarter.

State one thing about the State Unemployment Tax (SUTA).

Rates and earnings limits vary among states.

What is the fourth step for recording the payroll entries?

Record a journal entry to pay the employees.

What is the first step for recording the payroll entries?

Record the payroll for the present period in the payroll register.

What is one example of an internal control?

Require mandatory vacations for those with payroll responsibilities, having other employees perform this function in there absence.

State all the examples on internal controls.

Require mandatory vacations for those with payroll responsibilities, having other employees perform this function in there absence. Use cash payments or check minimally and increase the use of direct deposit of payroll checks. Have employees physically sign and show proper identification to receive their pay checks. Conduct periodic unannounced audits to ensure that all employees on the payroll actually work for the company. Cross-reference the payroll roster for duplicate addresses or Social Security numbers. Conduct a thorough pre-employment reference check for all payroll personal. Compare payroll expense per the payroll register to the actual amounts paid. Also compare amounts to payroll deposits made. Outsource payroll administration.

When is the ending date for the third quarter?

September 30th

Ghost employee fraud

Someone is recorded in the payroll system who does not work for the business.

As stated previously, generally all employers are subject to the Federal Unemployment Tax Act. What must these employers do?

Submit an Employer's Annual Federal Unemployment (FUTA) Tax Return, Form 940, no later than January 31 following the close of the calendar year.

An employer's counterpart to the Social Security number is what?

The Employer Identification Number (EIN), which is assigned by the Internal Revenue Service.

The IRS now requires what?

The IRS requires all companies to make tax deposits electronically, using the Electronic Federal Tax Payment System (EFTPS).

What is Form W-3 also known as?

The Transmittal of the Wage and Tax Statement, which is sent with Copy A of the employees' W-2 form to the Social Security Administration.

Which taxes come under the umbrella of the Payroll Tax Expense account?

The employer's share of the FICA taxes, the state unemployment tax, and the federal unemployment tax.

An employers payroll taxes are based on what?

The gross wages paid to employees.

The due date for the FUTA tax payment is when?

The last day of the month following the end of the quarter, the same as the due dates for the Employer's Quarterly Tax Return and for state unemployment taxes.

Employer Identification Number (EIN)

The number assigned to each employer by the Internal Revenue Service for use in the submission or reports and payments for FICA taxes and federal income tax withheld.

The accountant obtains the Social Security and Medicare taxable earnings amounts from where?

The payroll register.

State a fourth thing about workers' compensation insurance.

The premium rate varies with the amount of risk the job entails and the company's claims history.

State a second thing about the State Unemployment Tax (SUTA).

The proceeds are used to pay subsistence benefits to unemployed workers.

State one thing about Form W-2?

The source of information used to complete Form W-2 is the employee's individual earnings record.

State both things about Form W-2.

The source of information used to complete Form W-2 is the employee's individual earnings record. At least four copies of the W-2 form are required for each employee.

If the accumulated federal unemployment tax liability is greater than $500, then what?

The tax is deposited electronically, similar to how deposits are handled for employees' federal income tax withholding and FICA taxes.

Workers' compensation insurance

This insurance paid for by the employer provides benefits for employees injured or killed on the job. The rates vary according to the degree of risk inherent in the job. The plans may be sponsored by states or by private firms. The employer generally pays the premium in advance at the beginning of the year based on the estimated payroll. The rates are adjusted after the exact payroll is known.

What is the purpose of Form 941?

To report the tax liability for withholdings of employees' federal income tax and FICA taxes and the employer's share of FICA taxes.

What is a second example of an internal control?

Use cash payments or check minimally and increase the use of direct deposit of payroll checks.

When does the employer becomes liable for the taxes under the umbrella of the Payroll Tax Expense account. ASK SHIPMAN IF THEY ARE CALLED PAYROLL TAXES?

When the employees are actually paid, rather than at the time the liability to the expense is incurred.