This chapter discusses preparing payroll records including completing a payroll time card, calculating payroll taxes, filling out a payroll register and employee earnings record, and preparing payroll checks. Key terms are defined such as net pay, pay period, payroll, payroll register, payroll taxes, salary, social security tax, Medicare tax, tax base, total earnings, and withholding allowance. The chapter also provides examples of how to calculate earnings, taxes, and net pay.

1. Chapter 12 – Preparing Payroll Records

3. Calculate payroll taxes

4. Complete a payroll register and

5. an employee earning record

7. Salary Salary- The money an employee is paid for their services Usually used in conjunction with weekly, biweekly, semimonthly, or monthly earnings. Can be used interchangeably with “wages” Pay Period- The period covered by the salary payment. Payroll- To the business this is the combined amount of the earnings between all employees combined.

8. Sample Employee Time Card Alaska +8Hrs= 1.5 time California +8Hrs= 1.5 time +12Hrs= 2 Time Colorado +12Hrs=Premium Pay

9. Total Earnings- The total amount paid to the employee during the pay period. This is a “gross” amount (as opposed to NET) which means that it is before any deductions or taxes are taken from the paycheck.

10. $alary Net Income Tax Social Security Tax Medicare Tax

11. So why is it so important to give an accurate amount of allowances? If you claim too few allowances it will be nice when you get your return because you will probably get a refund. BUT….There is an opportunity cost to this money. You are giving the government a 0% interest loan on this money. If you claim too few allowances you will probably have to pay when you file. Not only this, nut if the difference is high enough you can get charged interest for the money owed.

12. IRS Form W-4

13. So I make $10 and hour and worked 40 hours. My check should be $400 right?? Federal Income Tax See tables-Need 3 bits of info Gross income  Remember the net example Marital status Number of allowances claimed State Income Tax 3% to 5% effective 1/1/11 Drops to 4% on 1/1/2015…..

14. Social Security Tax Base Contribution and benefit bases, 1937-2011 Year Amount

15. So I make $10 and hour and worked 40 hours. My check should be $400 right?? Continued… FICA (Federal Insurance Contributions Act) Social Security tax 6.2% of gross earnings up to tax base Medicare tax 1.45% of gross earnings (no tax break limit) FICA is paid by both the employee and the employer

17. Accumulated Earnings is the sum of the lime above it, plus the Total Earnings from the same line as the blank you are filling in. When calculating Accumulated Earnings, you use Total Earnings. You do NOT, NOT,NOT, NOT, NOT, NOT, NOTuse Net Pay. We are expressing the wages that have been EARNED, not what was deposited by each employee

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