Questions and Answers
In each pay period, the payroll information for each employee is recorded on his or her employee earnings record.
True
The payroll register provides all the payroll information needed to prepare a payroll.
False
A business deposits the total of gross wages in a separate payroll checking account.
False
Employer payroll taxes are business expenses.
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The employer social security tax rate is different than the employee social security tax rate.
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Federal unemployment insurance laws require that employers and employees pay taxes for unemployment compensation.
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The transaction to record employer payroll taxes expense is journalized at the end of the quarter.
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Each employer is required by law to periodically report the payroll taxes withheld from employee salaries.
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The timing of payroll tax payments is based on the amount owed.
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Form W-2 reports an employee's annual earnings and the withholdings for federal income, social security, and Medicare taxes.
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In the journal entry for a payroll, the amount debited to Salary Expense is the total of the Net Pay column of the payroll register.
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The tax base for Medicare tax is the same as the tax base for social security tax.
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If the tax base for calculating unemployment taxes is $7,000 and an employee's accumulated earnings are $6,500.00, and the employee earns another $1,500.00, the amount of new earnings subject to unemployment tax is $1,500.00.
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Some employers must deposit payments for withheld employees' federal income tax and social security and Medicare taxes on the next banking day.
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Each employer who withholds income tax, social security tax, and Medicare tax from employee earnings must furnish each employee with a quarterly statement.
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Until the amounts withheld from employee salaries are paid by the employer, they are recorded as _______.
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The payment of payroll taxes to the government is referred to as a:
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The total earnings subject to federal unemployment tax is referred to as:
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Each employer must file a _________ federal tax return showing the federal income tax, social security tax, and Medicare tax due the government.
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Employers are required to furnish each employee with an annual statement of earnings and withholdings before:
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The source document for paying employee income tax and social security and Medicare tax is:
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In general, employers are required to pay state unemployment taxes:
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The source document for paying state unemployment tax is:
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A state tax used to pay benefits to unemployed workers is:
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Study Notes
Payroll and Taxation Concepts
- Employee earnings records are maintained for payroll information each pay period.
- Payroll registers contain necessary payroll information but do not encompass all aspects required for payroll preparation.
Employer Responsibilities
- Employer payroll taxes qualify as business expenses, impacting overall financial statements.
- Employers report withheld payroll taxes periodically to comply with legal requirements.
- Timing for payroll tax payments hinges on the total amount owed by the employer.
Tax Rates and Payments
- The social security tax rate remains uniform for both employers and employees.
- Federal unemployment insurance mandates taxes from employers only; employees are not required to contribute.
- Form W-2 is pivotal for reporting annual earnings, documenting federal income tax, social security, and Medicare withholdings.
Juridical Accounting Entries
- Payroll journal entries debit Salary Expense based on the Gross Pay amount, not the Net Pay total.
- Employer obligations include paying withheld employee taxes promptly, sometimes as quickly as the next banking day.
Tax Bases
- Medicare and social security tax base calculations diverge, reflecting varying earnings thresholds.
- Unemployment taxes apply only to earnings up to a set limit; additional income may not be taxable if prior earnings have reached the threshold.
Documentation and Deadlines
- Employers must issue quarterly statements for withholdings to employees, but not all need to provide them.
- Federal tax returns showing owed amounts for income, social security, and Medicare taxes must be filed quarterly.
- Employers are required to issue annual statements of earnings and withholding by January 31 of the following year.
Tax Framework
- Payments for employee income tax and related taxes are substantiated by checks as source documents.
- State unemployment taxes are mandated to be paid during the month subsequent to each calendar quarter, ensuring timely compliance.
Specific Taxes
- State unemployment tax explicitly funds benefits for unemployed workers, differentiating it from federal obligations.
- Employers utilize checks as source documents for all significant tax payments, ensuring accurate financial record-keeping.
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Test your knowledge of payroll concepts in Accounting Chapter 13 with these flashcards. Each card presents a statement about payroll practices, requiring you to identify its accuracy. Prepare for exams with this interactive learning tool.
