Payroll Accounting CH 4 Bieg-Toland

401(k) contributions

Are taxed deferred up to $17,500 or 100% of pay- which ever is less (Lesser of the 2). These are taxed when they are withdrawn.

Employee penalties for wrong W-4 information

Are, in addition to any other penalty. subject to fines up to $1,000 for imprisonment for up to one year or both. Employees claiming excess deductions are subject to a $500 civil penalty for each offense.

Retirement and Pension Plans

Elective contribution and deferrals to plans containing a qualified cash or deferred compensation arrangement, such as 401(k). Are exempt from Federal income tax.

Wages,salaries, vacation allowances, supplemental payments, bonuses and commissions are examples of?

Employee compensation subject to withholding.

Accountable Plan

Employee expense reimbursement amounts that are paid under an accountable plan are not subject to income tax withholding.

Form W-4

Employee's withholding allowance certificate. Employers use the information on this form to compute the amount of income tax to withhold from employee's wages.

Additional withholding allowance

Employees can also reduce the amount of withholding by claiming a special withholding allowance. Must meet these situations. *Single one job. *Married with one job, spouse not working. *Wages of job and/or spouses income equal $1,500 or less.

Personal allowances

Employees can claim a personal allowance provided they are not claimed by someone else. 2013 the personal allowance was $3,900. A married employee can also claim a spouse.

Dependent allowances

Employees may claim one allowance for each dependent (other than spouse). To qualify the person must meet specific requirements set forth by the government there are 6 test involved.

Withholding Allowance

Exempt portion of an employees' wages (earnings). Personal, spouses, dependents are additional withholding allowances.

Transportation in a Commuter Highway Vehicle and Transit pass

Exempt up to $245 per month

Moving expense reimbusements

For qualified expenses, if the employee is entitled to a deduction for these expenses on their individual's federal income tax return. Exempt from Federal income tax

Employer must have how many employee's?

Greater or equal to 1 employee

Employers withhold federal income taxes on what amount?

Gross wages before deductions such as state and local taxes, insurance premiums, saving bonds, profit sharing contributions and union dues.

Wage bracket method

IRS provided statutory wage-bracket tables for weekly, bi-weekly, semimonthly, monthly and daily or miscellaneous pay periods.

Educational Assistance

If education maintains or improves employee's skills required. For no-job related educational assistance up to $5250 per year. Exempt from Federal income tax

Supplement wages

Include items such as vacation pay, bonuses, commissions, exercised non-qualified stock option, and dismissal pay.Since these wages may be paid at a different time than with regular payroll. The employer must decide whether to lump the regular wages with supplement wages.

Dependent Care Assistance

Is not included in income. Up to $5,000 can be excluded from employee's gross income without being subjected to SS/Medi or Federal taxes.

By what date must a tipped employee report cash tips to its employer?

10th of the month following the month they receive the tips, and more than $20 a month in tipped income.

How long does an employer required to keep your W-4 after you leave their employment?

4 years.

What are some nontaxable fringe benefits?

Qualified employee discounts, services provided at no additional cost, Use of on-premises athletic facilities, reduced tuition for education.

Employer's can be what type of business's?

Sole proprietors, partners, corporation, non-profit, government or state agency.

Catch-up contributions

Taxed deferred maximum limit is $51,000 (employer & employee combined). Max limit per year if you are 50 yrs or older is $5,500.

What are the 2 way fringe benefits are taxed?

The benefit value is added to regular pay and taxes are withheld on the total. The benefit is taxed at a 25% tax rate

Amount of allocated tips to employees equal:

The difference between tips reported and 8% of gross receipts, other than carryout sales and sales with at least 10% service charge added.

Percentage method

There are 4 steps to complete the withholding. Using a percentage of the excess after the withholding amount is taken out.

Directors of a corporation are not considered employees unless..what?

They perform services other than participation in board meetings.

IRA (Individual Retirement Accounts)-definition

Traditional and Roth- Allow employees to contribute amount from their wages into retirement accounts. Contributions reduce the amount employees' wages that are subject to federal income tax.

Federal income withholding uses which two methods

Wage bracket method and Percentage method

Can you change or amend a W-4?

Yes, you can decrease or increase the number of allowances. within 10 days. The employer makes the changes effective within 30 days. If you increase the number of allowances you are not required to change your form.

Are Supplement Unemployment Compensation taxable?

yes

What is De Minimis Fringe benefit?

Property or service that the value is so small you don't track it.

What 3 conditions must be met before Federal tax is withheld by an employer (individual)?

*Must be an employer-employee relationship *payments received must be defined as wages *Employment must not be exempt by law.

Employee's business expense reimburements

Accountable plans for amounts not exceeding specified government rates for mileage, lodging, meals, and incidental expenses. Exempt from Federal income tax

What is non-accountable travel expenses?

Advances added to salary and is subject to withholding taxes Can deduct on personal taxes.

What is accountable travel expenses?

Advances not added to salary and part of a plan is not subject to withholding taxes.Employee must return excess that is not used. Can not deduct on personal taxes.

When are fringe benefits taxable?

Benefits that are taxed at their fair market value at the time that they are given

What are some employer-provided fringe benefits?

Cars, free or discounted flights, vacations, memberships in social or country clubs and tickets for entertainment and sporting events.

Traditional retirement plan-limits

Contribution-lesser than $5,500 max or 100% of pay (lesser of the two). If 50 yrs old or older additional $1,000. Can add additional contributions for spouse- max $5,500. When withdrawn they become taxable income.

Roth IRA

Contributions are tax free and when withdrawn for retirement they are tax free (no taxable income)

Allocated Tips

Large food and beverage establishment that have more than 10 employees may be required to allocate tips among employees if payroll period are less than 8%

What are some examples of taxable payments to employees?

Meals and Lodging- unless furnished for the employer's convenience. Moving expenses- Non-qualified expenses-cost of old residence,house hunting, temporary living expenses and meal

Can partners be considered employees?

No

Tax Deferred

Not tax limitation- Limits on Employee and Employer contributions- Taxed when withdrawn.

When is travel and business expenses taxable?

if the employee is not required to or does not substantiate expenses with a receipt. and (2) the employee receives travel advances and does not or is not required to return any unused amount of the advance.