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Chapter 11 Payroll responsibilities within the accounting dept.

Chapter 11 Payroll responsibilities within the accounting dept. Family Economics & Financial Education. The Payroll Department. Within the Accounting Department Employer has the responsibility to pay each employee a fair, non-discriminated salary

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Chapter 11 Payroll responsibilities within the accounting dept.

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  1. Chapter 11Payroll responsibilities withinthe accounting dept. Family Economics & Financial Education

  2. The Payroll Department • Within the Accounting Department • Employer has the responsibility to pay each employee a fair, non-discriminated salary • www.salary.com to find your worth, according to zipcode • Pay will vary according to Cost of Living • Real Estate prices and Taxes are the major variable

  3. Payroll Tax evasionVideo: http://www.myfoxphilly.com/dpp/money/Nifty_Fifties_Tax_Troubles_051612 • The five owners and managers of the Nifty Fifty's restaurant chain have been charged with cheating the IRS out of millions of dollars, the U.S. Attorney's office announced on Wednesday. • Robert Mattei, 73, of Delray Beach, Florida; Leo McGlynn, 52, of Swarthmore, Pa.; Brian Welsh, 48, of Springfield, Pa.; Joseph Donnelly, 49, of Springfield, Pa.; and Elena Ruiz, 46, of Drexel Hill, PA were charged in connection with an alleged tax evasion conspiracy. • U.S. Attorney Zane Memeger said the five cheated the Internal Revenue Service by failing to properly account for more than $15 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes. • http://abclocal.go.com/wpvi/story?section=news/local&id=8663808

  4. The Buffet Rule • Listen: • www.whitehouse.gov/photos-and-video/video/2012/03/31/weekly-address-passing-buffett-rule-so-everyone-pays-their-fair-sh

  5. Payroll Deductions • http://www.ehow.com/video_5112528_understanding-payroll-deductions.html

  6. Some Departments within accounting • Auditing • Payroll • Benefits Administration: Medical and Retirement • Financial Reporting • Cost • Tax • AP/AR management

  7. Accounting transactions • Salary • An Expense of doing business • Gross Pay • Salary Deductions (optional and required) • Must be electronically deducted before employee receives paycheck • Liabilities of doing business • Transactions: • All payables are Credited (deducted from the employee’s paycheck) • Employer “owes” this money to different agencies/companies • Net Pay – the amount the employee actually takes home after all deductions are made

  8. The Debits and Credits • Gross Salary Expense • DEBITED • All Payables (deductions) • CREDITED • Net Pay: Cash • CREDITED

  9. What are Payroll Taxes? • Taxes – Required charges imposed on US citizens by local, state, and federal governments • Used to provide public goods and services • Largest amount of taxes a person pays is on his/her income What are some services in your community that are funded by tax dollars?

  10. Facts • On average, approximately 40% of a person’s paycheck will be deducted due to taxes, benefits, and investment choices before they even receive a paycheck • Taxes- Required charges imposed on citizens by local, state, and federal governments

  11. Provide public goods and services Taxes What is an item or service that you use every day that is paid for by taxes? • Citizens pay many different types of taxes in many different ways • Income tax, sales tax, property tax • Largest amount of taxes is paid on income

  12. REQUIRED TAX DEDUCTIONS • Federal Income Tax • Based on how much you make • US gov’t has 6 brackets • State Income tax – flat rate based on state • Local Income tax – flat rate based on township • FICA (Social Security Tax) – 4.2% • For those retired after age 62.5 or legally disabled to work • Unemployment tax - .08% • Goes to those in your state that are unemployed • Medicare – 1.45% • Goes to those in our country who are uninsured, underinsured, or those retired that are eligible for gov’t aide

  13. Federal Income TaxBrackets • 10% - $0 to $8,375 • 15% - $8,375 to $34,000 • 25% - $34,000 to $83,600 • 28% - $83,600 to $174,400 • 33% - $171,850 to $373,650 • 35% - $373,650 and up

  14. Taxes continued • Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress for individuals and private businesses

  15. OPTIONAL PAYROLL DEDUCTIONS • Medical Benefits – health insurance • Employer responsibility to have a relationship with 1 or more health insurance companies • Offer benefits to your employees • Employer pays a %; the employee pays a % (premium) • More the employer pays, the greater expense BUT it could make the employer more desirable/loyalty • Retirement Planning – • Employer offers an investment firm to withdraw a % of paycheck and invest in the stock market or other investment tool • 401K (mutual funds or groups of stocks) • IRA (retirement account, with interest) • Money is UNTOUCHABLE until age 62.5 (penalty is 20% for early/partial withdrawal)

  16. Largest Investment firms THAT Employers work with • Vanguard and Fidelity • Employee meets with a Financial Advisor to discuss investment strategy and retirement goals at time of Hiring • Here is the Discussion: • How much should I invested each week from my Gross Pay? • What stocks/investments/401ks should I invest in? • What is my RISK tolerance? • How long do I plan to work for? • What age would I like to retire at? • How much $ do I want waiting for me when I retire so I live comfortably?

  17. How are Taxes Paid? • By Workers • Through deductions made from your Gross Salary by your Employer – Income Taxes • By homeowners – Real Estate and School Taxes • By shoppers – Sales Tax • By businesses – their profit is taxed

  18. Real Estate taxes • These taxes are separate and not deducted from one’s paycheck • This is owed once a year by homeowners – check sent to Local Government • Broken into 2: • Property – based on value of home • School – based on needs of school

  19. Starting a New Job

  20. Form W-4 Employee’s Withholding Allowance Certificate • Determines the percentage of gross pay which will be withheld for taxes • Allowances • Used to determine the amount of federal taxes withheld from the paycheck • Dependents lower your taxes! • Dependent – a person who relies on the taxpayer for financial support

  21. Form I-9 Employment Eligibility Verification Form • Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States • Must provide documentation which establishes identity and employment eligibility • Examples include driver’s license, passport, Social Security card, and birth certificate

  22. Form I-9Employment Eligibility Verification Form Verifies the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States

  23. Methods for paying employees • Live Check • Direct Deposit

  24. Reading a Paycheck Family Economics & Financial Education Why is it important to read your paycheck stub?

  25. Paycheck Stub • Paycheck Stub • A document included each pay period which outlines paycheck deductions

  26. Personal Information • Personal Information • States the employee’s full name, address, and social security number • Always check to ensure this information is correct

  27. Pay Period • Pay Period • The length of time for which an employee’s wages are calculated; most are weekly, bi-weekly, twice a month, or monthly • The last day of the pay period is not always payday to allow a business to accurately compute wages

  28. Gross Pay • Gross Pay • The total amount of money earned during a pay period before deductions • This is calculated by multiplying the number of hours worked by the hourly rate • If a person is on salary, it is the total salary amount divided by the specified time period

  29. Net Pay • Net Pay • The amount of money left after all deductions have been withheld from the gross pay earned in the pay period

  30. Deductions • Deductions • The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits

  31. Year-to-Date • Year-to-Date • Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub

  32. Conclusion • Review the following concepts: • Form W-4 • Form I-9 • Reading a paycheck definitions • Net vs. gross pay • Required and Optional deductions

  33. Activity • Calculating Payroll • Using Excel to calculate payroll and make deductions • Chapter 11 on website

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