Payroll Unit
Terms Write down as many payroll terms or payroll taxes that you can think of in 2 minutes. Ready, Set, Go!
Payroll Pay Periods Weekly 52 checks a year Biweekly 26 checks a year, every other week Semi-monthly 24 checks a year, usually on the 1 st and 15 th Monthly 12 checks a year
How are you paid? Salary Paid a certain amount of money each pay period Not based on hours worked Usually can not earn overtime pay Hourly Pay will vary each pay period Pay directly relates to hours worked Can earn overtime pay
Gross Pay Amount before any taxes and/or any other deductions are taken Gross pay = regular + overtime earnings earnings For example: Bryce makes $10.50 per hour and works 80 hours in 2 weeks. His gross pay would be: $10.50 per hour x 80 hours = $840.00
Standard Work Week Federal Labor Standards Act of 1938 Established a standard week to be 40 hours Amount over 40 hours is eligible for overtime rate Overtime Rate (time and a half) = at least 1.5 times the hourly rate
Time Sheets Each employee is given a time card or time sheets to keep track of hours worked Time clock used to clock in/out and keeps accurate record of hours worked. Usually has time card holder next to it. Swipe cards are also used for electronic time records
Payroll Clerk Check time for accuracy addition, vacation or sick pay Total hours worked Enter hours into payroll software if not already entered electronically
Net Pay Net Pay = Gross Pay Deductions Example deductions: Federal, State, Social Example deductions: Federal, State, Social Security, Medicare, City, and any other insurance
Federal Income Tax Withholding One of the largest deductions Paid to the federal government Amount deducted based on 3 things: 1. Employee s gross earnings 2. Employee s filing status 3. Number of withholding allowances claimed
Federal Income Tax Withheld Amount of taxes withheld are determined by using tax tables created by the Internal Revenue Service (IRS) http://www.irs.gov/pub/irs-pdf/p15.pdf
Withholdings Withholding Allowance (exemption) is a portion of gross earnings not subject to tax Permitted 1 exemption for himself/herself, 1 for spouse, and 1 for each dependent (child or elderly parent) W-4 must be completed when hired & K-2 for Kentucky withholding http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3
State Withholdings Calculated using withholding charts provided by the state Based on withholding exemptions claimed on K-4 http://www.revenue.ky.gov/business/whtax.htm
FICA Federal Insurance Contribution Act Established by Congress during the depression in 1930 s 1991 Social Security & Medicare funds were separated into 2 separate programs Paid by both employees & employers
FICA cont. Social Security 6.2% for first $106,800 After a person earns $106,800 they do NOT pay in Social Security tax for the rest of the year. Medicare No maximum income level All wages are taxed, except when employee participates in flexible benefits program
Employer s Payroll Taxes Deposit Federal Income Tax withholdings monthly by the 15 th to a local bank Federal Reserve Bank. Large businesses may be required to pay electronically each pay period If employer s accumulated tax for the quarter is less than $500, then they can send payment in with 941-Form.
Employer s Payroll Taxes Pay withholding taxes from employee s checks plus employer s must match FICA amounts. Total Amount Due = Total Federal Withholding + Employee s FICA + Employer s Matching FICA
FUTA Tax Federal Unemployment Tax Act Paid entirely by employers, do not affect paycheck amount Unemployment compensation to workers who have lost their jobs.
FUTA Tax Pay on each employee for their first $7,000 earnings each year Gross FUTA rate 6.2% Credit for State Unemployment taxes 5.4% Net FUTA rate 0.8%
SUTA Tax State Unemployment Tax Act State sets % to each business Employer s pay SUTA, does not affect payroll check Calculated on each employee for the first $8,000 in earnings every year
Local Taxes County and City can each charge additional payroll taxes Glasgow City Taxes = 1.5% of gross pay Employee s pay these taxes
Other Deductions Insurance medical, dental, vision can be set up as Cafeteria Plans Cafeteria Plans (Sec. 521) allow insurance deductions to be taken from gross pay before other payroll taxes are calculated 401K and other Retirement plans
Employer s Tax Forms Form 941 - Federal Withholding Due by 15 th of each month, or every payroll Form due quarterly http://www.irs.gov/pub/irs-pdf/f941.pdf Form 940 - FUTA Form due annually Pay quarterly if owe over $100, to pay make a deposit at any Federal Reserve Bank http://www.irs.gov/pub/irs-pdf/f940.pdf
Employer s Tax Forms K-1 Kentucky Withholding Due quarterly with payment K-3 due annually Form UI-3 (SUTA) State Unemployment Tax Due quarterly with payment Local Taxes Due quarterly with payment
Terms How many terms did you get right? Can you name more in the next 2 minutes? Can you name more in the next 2 minutes? Go!