ch4_2012

ch4_2012 - PayrollAccounting2012...

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CHAPTER 4  CHAPTER 4  INCOME TAX WITHHOLDING INCOME TAX WITHHOLDING Payroll Accounting 2012 Payroll Accounting 2012 Bernard J. Bieg and Judith A. Toland Bernard J. Bieg and Judith A. Toland
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Learning Objectives Explain coverage under the Federal Income Tax (FIT) Withholding Law Explain types of withholding allowances that may be claimed and purpose/use of Form W-4 Compute amount of FIT withheld using various methods Explain completion of many quarterly and year- end information returns and impact of state/local income taxes on payroll accounting process
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Employee-employer relationship must exist for FIT withholding to apply See Chapter 3 for how to determine status Statutory nonemployees (direct sellers and qualified real estate agents) have no federal taxes withheld Taxable wages for FIT withholding purposes Wages/Salaries Vacation Supplemental payments Bonuses/Commissions Taxable fringe benefits (see next slide) Tips Cash awards Coverage Under FIT Withholding Laws LO-1
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Fringe   Benefits Noncash fringe benefits treated as compensation Employer must withhold FIT unless specifically excluded Examples of noncash fringe include Tickets to athletic events Athletic club membership Personal use of corporate car Frequent flier miles Stock options (when option exercised) Complete list found in Figure 4-2 (page 4-6) Specifically excluded fringe benefits include Qualified employee discounts Complete list found on page 4-4 LO-1
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How to Withhold FIT on Fringe Benefits Value and withhold like supplemental wages (flat 25%) Employer must figure value of fringe benefits no later than 1/31 Value and add to regular pay - treat as one paycheck and withhold accordingly Flexible reporting – option of treating benefits as being paid on any basis. For example, can add $500 on 4 paychecks or entire $2,000 with one paycheck and calculate withholding accordingly. Note: Employer can choose not to withhold FIT on employee’s personal use of corporate car LO-1
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FIT   Withholding on Tips Employee must report tips to employer by 10th of each month Employer must withhold FIT and FICA based on this information (called “reported tips” ) Employer is not required to withhold on allocated tips - only reported tips Tip allocation can be done one of three methods – hours worked, gross receipts or good faith agreement LO-1
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FIT Withholding on Tips What if taxes withheld > hourly wages to be paid? For example blackjack dealer in Lake Tahoe reports tips = $2,000 for one week; her FIT/FICA withholding will exceed her paycheck In that situation, she gets no paycheck and pays quarterly estimated tax payments or Can pay balance of tax when she files1040 tax return LO-1
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Traveling Expenses Travel reimbursements made to an employee, paid under an “accountable
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This note was uploaded on 01/19/2012 for the course ACCT 101 taught by Professor Shah during the Spring '10 term at HCCS.

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ch4_2012 - PayrollAccounting2012...

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