CP ACCOUNTING



8 Employer Taxes, Payments & Reports

PERFORMANCE OBJECTIVES

1. Calculate the amount of payroll tax expense and journalize the related entry.

2. Journalize the entry for the deposit of employees’ federal income taxes withheld and FICA taxes (both employees’ withheld & employer’s matching share) and prepare the deposit coupon.

3. Journalize the entries for the payment of employer’s state and federal unemployment taxes.

4. Journalize the entry for the deposit of employees’ state income taxes withheld.

5. Complete Employer’s Quarterly Federal Tax Return, Form 941.

6. Prepare W-2 and W-3 forms and Form 940

7. Calculate the premium for workers’ compensation insurance, and prepare the entry for payment in advance.

8. Determine the amount of the end-of-year adjustments for (a) workers’ compensation insurance and (b) accrued salaries and wages, and record the adjustments.

KEY POINTS

1. The Employer Identification Number EIN must be listed on every federal tax report.

2. Payroll taxes, consisting of the employer’s FICA taxes along with state and federal unemployment taxes, are debited to the Payroll Tax Expense account.

3. The amount of an employer’s FICA taxes and unemployment taxes are determined by multiplying total taxable earnings subject to appropriate maximum levels (from the payroll register) by appropriate tax rates.

4. The maintenance of adequate records is necessary for compiling information for various tax returns.

5. An employer is not liable for payroll taxes until employees are actually paid.

6. A tax calendar is useful as a schedule for payment of taxes and submission of reports.

KEY TERMS:

|Electronic Federal Tax Payment EFTPS |Form W-2 |

|Employer Identification Number |Form W-3 |

|Federal Unemployment Tax (FUTA) |Payroll Tax Expense |

|Form 940 |Quarter |

|Form 941 |State Unemployment Tax (SUTA) |

|Form 941 -V |Workers’ Compensation Insurance |

LECTURE OUTLINE

I. Employer Identification Number

II. Employer’s Payroll Taxes

A. Payroll Tax Expense Account

B. Journal Entry for Payroll Tax Expense

P/R tax expense xxx

FICA Tax Payable xxx

SUTA Payable xxx

FUTA Payable xxx

III. Sequential Order of Payroll Entries

A. Payroll entry from P/R register

B. Entry to record P/R Tax Expense

C. Entry to transfer cash to P/R cash account

IV. Payment of Payroll Taxes

A. Employees’ Income Taxes & Employee/Employer share of FICA

Employee’s FIT xxx

FICA Tax Payable xxx

Cash xxx

B. State Unemployment Taxes

SUTA Tax Payable xxx

Cash xxx

C. Federal Unemployment Taxes

FUTA Tax Payable xxx

Cash xxx

D. State Income Taxes

Employee’s State Income Tax xxx

Cash xxx

V. Workers’ Compensation Insurance

A. Journal entry for estimated premium paid in advance

Prepaid Insurance, WC xxx

Cash xxx

B. Adjusting Entries

For compensation Insurance expired:

WC Insurance Expense xxx

Prpd Ins xxx

For Additional Compensation Insurance Premium Owed:

WC Insurance Exp xxx

WC Ins Payable xxx

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