Employer's Payroll Taxes: Calculation and Journalization

1. Chapter 13 $ Section 2 Employer’s Payroll Taxes $ • What You’ll Learn • How to calculate the employer’s FICA taxes. • How to calculate federal and state unemployment taxes. • How to journalize and post employer’s payroll taxes. $ $

2. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ Why It’s Important In addition to the amounts withheld from employees’ payroll checks, the employer owes taxes based on the weekly payroll. These taxes are liabilities of the business. $ $ • Key Terms • Federal Unemployment Tax Act (FUTA) • State Unemployment Tax Act (SUTA) • Payroll Tax Expense $

3. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ The Employer’s FICA Taxes • The current rates are 6.2% for social security tax and 1.45% for Medicare tax. • The employer and the employee pay social security tax on gross earnings up to the maximum taxable limit per employee. • The employer and the employee pay Medicare tax on all gross earnings. There is no maximum taxable limit. $ $ $

4. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ Federal and State Unemployment Taxes • The Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA) require employers to pay unemployment taxes. • The employer pays both federal and state unemployment taxes. • The maximum federal unemployment tax is 6.2% on the first $7,000 of an employee’s annual wages. • State unemployment tax rates and maximum taxable amounts vary among states. $ $ $

5. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ Journalizing the Employer’s Payroll Taxes • The employer’s payroll taxes are business expenses recorded in the Payroll Tax Expense account. • Use the Social Security Tax Payable and the Medicare Tax Payable accounts to record both the employees’ and the employer’s FICA taxes. • Record the employer’s unemployment taxes in the Federal Unemployment Tax Payable and State Unemployment Tax Payable accounts. $ $ $

6. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ Journalizing the Employer’s Payroll Taxes (con’t.) $ JOURNAL ENTRY $ $

7. Demonstration Problem 13-2 & 13-3

8. 6.2% 1.45% $244.68 $57.22 $546.58 .8% 5.4% $213.11 $31.57

9. $546.58 $244.68 $57.22 $31.57 $213.11 13-2, 26 200- June 23 Payroll Tax Expense 546.58 Social Security Tax Payable 244.68 Medicare Tax Payable 57.22 State Unemployment Tax Payable 213.11 Federal Unemployment Tax Payable 31.57 Payroll Register 6/23

10. Section 2 Employer’s Payroll Taxes (con’t.) Chapter 13 $ Check Your Understanding p326 $ • Thinking Critically 1&2 • Problem 13-2 & 13-3 $ $