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Unformatted text preview: TAL 335 40 SOC. SEC. MEDICARE
TAX 20 79 4 86 FED. INC.
TAX 35 00 STATE
INC. TAX 6 71 HOSP.
INS. 4 10 OTHER TOTAL 71 46 NET
PAY 263 94 79 2 1
2 Section 3 Payroll Records 308-337_CH12_868829.indd 325 CK.
NO. 325 9/15/05 2:23:41 PM Summary CHAPTER 12
Key Concepts 1. Federal and state laws require employers to keep accurate records of all payroll information.
Most employers use a payroll system to ensure that employees are paid on time and that their
payroll checks and records are accurate. A well-designed payroll system achieves two goals:
• To collect and process all information needed to prepare and issue payroll checks.
• To generate payroll records needed for accounting purposes and for reporting to government
agencies, management, and others.
A computerized system does the following:
• Performs all payroll calculations
Prepares and prints a payroll register
Prints the payroll checks and stubs
Maintains employee’s earnings records 2. Gross pay is the amount an employee earns before deductions. It may be calculated by various
salary plus commission or bonus,
piece rate, or
a combination of these methods. Some employees who work more than 40 hours in a week are paid overtime. The overtime rate is
usually 1½ times the regular rate of pay. Regular
$8.20 1.5 Overtime
$12.30 3. Withholdings from gross earnings are called deductions. Some deductions are required by law.
Other deductions are voluntary.
Deductions Required By Law
• federal income tax:
determined by Form W-4 and tax tables
• social security tax:
6.2% of total gross earnings up to $90,000
• Medicare tax:
1.45% of total gross earnings
• state or local tax:
determined by the state or city 326 Chapter 12 Summary 308-337_CH12_868829.indd 326 9/15/05 11:46:27 AM Summary CHAPTER 12 Voluntary Deductions
• union dues
• insurance payments
• charitable contributions
• 401(k) plans
• other retirement-related contributions
4. Net pay is the amount...
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