Deck 9: Payroll Accounting: Employer Taxes and Reports

Question 1

Employers are allowed a credit against the FUTA tax for participation in state unemployment programs.

Answer 1

True

Question 2

Self-employment tax is double the Social Security and Medicare rates.

Answer 2

True

Question 3

One-half of the self-employment tax is really a personal expense to the owner of the business.

Answer 3

True

Question 4

The date by which federal income tax withholding,Social Security,and Medicare taxes must be paid depends on the amount of these taxes.

Question 5

Form 940 is called the Employer's Quarterly Federal Tax Return.

Question 6

If an employer wishes,the FUTA tax may be deducted from employees' earnings.

Question 7

The FUTA tax applies to all employee earnings throughout the year.

Question 8

The employer must pay the amount owed for Social Security and Medicare by the business to the IRS; however,the employees pay for Social Security and Medicare directly to the IRS.

Question 9

Employers' payroll taxes include FICA,FUTA,and SUTA taxes.

Question 10

The amount of employers' Medicare taxes is computed by multiplying total earnings by 1.45%.

Question 11

In general,the larger the amount of Social Security and Medicare taxes due from an employer,the more frequently payments must be made.

Question 12

The due date for payroll taxes is the last day of each fiscal quarter: March 31,June 30,September 30,and December 31.

Question 13

Persons earning self-employment income of $400 or more must pay a self-employment tax.

Question 14

Self-employment tax is a contribution to the unemployment compensation program.

Question 15

The cost of workers' compensation insurance to a construction company with 15 employees would likely be higher than the cost of insurance to a small candy company with 15 employees.

Question 16

The payroll register is a key source of information for computing employer payroll taxes.

Question 17

Most employers have to pay FICA and FUTA taxes.

Question 18

Self-employment income is the gross income of a trade or business run by an individual.

Question 19

The employer FICA tax is levied on employers at the same rate and on the same earnings bases as the employee FICA tax.

Question 20

Self-employed individuals can be viewed as both employer and employee.

Question 21

In most states,if an employer has very few former employees who collect unemployment compensation,the employer qualifies for a lower state unemployment tax rate.

Question 22

Employees usually pay the entire cost of workers' compensation insurance.

Question 23

Journalizing payroll taxes for the employer will require several debit entries but only one credit entry.

Question 24

Each employer must have an Employer Identification Number (EIN)to show on all tax reports.

Question 25

The EFTPS is an electronic funds transfer system for making federal tax deposits.

Question 26

Any Federal Reserve Bank or other authorized commercial bank may issue an Employer Identification Number (EIN).

Question 27

Which of the following is a payroll tax normally paid by both the employee and the employer?

A) Medicare tax
B) FUTA tax
C) property tax
D) SUTA tax

Question 28

The Social Security,Medicare,FUTA,and SUTA tax accounts normally have credit balances.

Question 29

SUTA tax payments vary among states but are usually required on a quarterly basis.

Question 30

The due date for payroll taxes is not the same date for all employers.

Question 31

Employer payroll taxes clearly are an insignificant cost of doing business.

Question 32

The Social Security,Medicare,and FUTA tax accounts are debited when the taxes are actually paid to the IRS.

Question 33

If an employer qualifies for a lower state unemployment tax rate,this lowers the credit allowed in computing the federal unemployment tax due.

Question 34

Form 941,Employer's Quarterly Federal Tax Return,must be filed with the IRS at the end of the month following each calendar quarter.

Question 35

Social Security,Medicare,FUTA,and SUTA taxes have separate liability accounts.

Question 36

FUTA taxes are deposited and an annual report of federal unemployment tax is filed using Form 8109.

Question 37

Workers' compensation provides insurance for employees who suffer a job-related illness or injury.

Question 38

In most states,the state unemployment tax is levied only on employers.

Question 39

By January 31 each year,employers must furnish each employee with a Wage and Tax Statement.

Question 40

Since there is no maximum earnings on the Medicare component of the Social Security tax,the Medicare tax rate of 1.45% is applied to total earnings.

Question 41

To journalize the employer's payroll taxes,we need to credit all of the following accounts EXCEPT

A) Payroll Taxes Expense.
B) Social Security Tax Payable.
C) Medicare Tax Payable.
D) FUTA Tax Payable.

Question 42

A self-employment tax is a contribution to the

A) charities of the individual owner's choice.
B) SUTA programs.
C) FUTA programs.
D) Social Security and Medicare programs.

Question 43

The employer pays which of the following to the Internal Revenue Service?

A) the employer's Social Security and Medicare taxes
B) sales taxes
C) property taxes
D) no taxes

Question 44

The self-employment tax rate is double the rate of

A) Social Security and Medicare taxes.
B) FUTA taxes.
C) SUTA taxes.
D) property taxes.

Question 45

A self-employment tax is required of an individual who owns his or her own business and makes

A) $1 or more.
B) $200 or more.
C) $400 or more.
D) $1,000 or more.

Question 46

The date on which an employer must pay Social Security and Medicare taxes is

A) January 1 of each year.
B) December 31 of each year.
C) June 30 of each year.
D) dependent on the amount of the taxes.

Question 47

An Employer Identification Number (EIN)is obtained by the employer from the

A) nearest Federal Reserve Bank.
B) CIA.
C) Internal Revenue Service.
D) nearest local federally insured bank.

Question 48

To journalize the payment of Medicare taxes to the IRS,the correct entry would be

A) debit Medicare Tax Payable and credit IRS.
B) debit Medicare Tax Payable and credit Social Security Payable.
C) debit Medicare Tax Payable and credit Cash.
D) debit Medicare Tax Payable and credit Payroll Taxes Expense.

Question 49

A key source of information for computing employer payroll taxes is the

A) statement of owner's equity.
B) end-of-period balance sheet.
C) payroll register.
D) employees' check stubs.

Question 50

The employer usually pays the entire cost of

A) FICA.
B) Workers' Compensation Insurance.
C) Medical Insurance.
D) Disability Insurance.

Question 51

The rules by which employers must deposit Social Security and Medicare taxes can be found in the

A) Circular E--Employer's Tax Guide.
B) Circle K Tax Guide.
C) Federal Reserve Bank Tax Guide.
D) state tax guide.

Question 52

Employers who have $100,000 or more due in federal income tax withholding and Social Security and Medicare taxes on any day during the current quarter should journalize the debt and pay at the end of the

A) year.
B) quarter.
C) month following the end of the quarter.
D) next banking day.

Question 53

The federal unemployment tax is levied on

A) employers and is not deducted from employees' earnings.
B) employees and is deducted from customer payments.
C) employers and is deducted from employees' earnings.
D) employees and employers.

Question 54

When all taxes have been paid,the Social Security Tax Payable account will have

A) a debit balance.
B) a credit balance.
C) a zero balance.
D) equal debit and credit balances.

Question 55

Form 941 is a(n)

A) Employee Withholding Allowance Certificate.
B) Employer's Quarterly Federal Tax Return.
C) Wage and Tax Statement.
D) Employer's Annual Federal Unemployment Tax Return.

Question 56

Which of the following tax programs often has a merit-rating system to encourage employers to provide regular employment for workers?

A) FICA
B) FUTA
C) SUTA
D) workers' compensation insurance

Question 57

The total payroll cost to an employer of an employee who has gross earnings of $78,000 is

A) $78,000 plus 30 percent.
B) less than $78,000.
C) exactly $78,000.
D) more than $78,000.

Question 58

Employers who have less than $2,500 due in federal income tax withholding and Social Security and Medicare taxes at the end of the quarter should journalize the debt and pay at the end of the

A) year.
B) quarter.
C) month following the end of the quarter.
D) next banking day.

Question 59

Melissa Taylor has gross earnings of $425 and withholdings of $26.35 for Social Security tax,$6.16 for Medicare tax,and $35 for federal income tax.Her employer pays $26.35 for Social Security tax,$6.16 for Medicare tax,$3 for FUTA tax,and $9 for SUTA tax.The total cost of Melissa to her employer is

A) $32.51.
B) $425.00.
C) $469.51.
D) $437.00.

Question 60

After estimating its payroll for the year,an employer usually pays workers' compensation insurance

A) at the beginning of the year.
B) monthly.
C) quarterly.
D) at the end of the year.

Question 61

Anthony Pescador owns Sundance Florist.He does his banking at United Credit Union (UCU)in Myrtle Beach,South Carolina.The amounts in his general ledger for payroll taxes and the employee's withholding of Social Security,Medicare,and federal income tax as of April 15 of the current year show the following: Social Security tax payable (employer and employee),$3,412; Medicare tax payable (employer and employee),$816; FUTA tax payable,$180; SUTA tax payable,$1,256; and Employee income tax payable,$9,828.Journalize the payment of the Form 941 deposit to UCU and the payment of the SUTA tax to the State of South Carolina as of April 15,20--.

Question 62

Sunny Hills Farm estimated its payroll for the coming year to be $102,000.Its workers' compensation insurance premium rate of 0.6% is paid at the beginning of each quarter.
Required:
1.Calculate the estimated cost of workers' compensation insurance for the year.
2.Show the journal entry for the first quarterly payment on January 2,20--.
3.Assume Sunny Hills Farm's actual payroll for the year was $105,000.Calculate the additional premium owed for 20--.Record the adjustment needed at December 31,20--.The actual payment of the additional insurance will not take place until January of the following year.

Question 63

The ____________________ tax is levied on employers to raise funds to pay unemployment benefits.

Question 64

From the following information from the payroll register of Veronica's Auto Supply Store,calculate the amount of taxable earnings for unemployment and FICA tax,and prepare the journal entry to record the employer's payroll taxes as of April 30,20--.Social Security tax is 6.2% on the first $94,200 of earnings for each employee.Medicare tax is 1.45% of gross earnings.FUTA tax is 0.8%,and SUTA tax is 5.4% each on the first $7,000 of earnings.
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Cumulative}\quad \text { Pay Current } \quad \underline{\text { Taxable Earnings }}$
$\begin{array}{lrr} & \text { Before Current } & \text { Gross } & \text { Unemployment } & \text { Social } \\\underline{\text { Employee Name }}&\underline{\text { Earnings }} & \underline{\text { Pay }} &\underline{ \text { Compensation }} & \underline{\text { Security} }\\ \text { Carnavale, Liz } & \$ 6,400 & \$ 1,800 \\\text { O'Malley, Sean } & 6,850 & 1,800 \\\text { Sarlo, Jarred } & 109,300 & 3,700 \\\text { Mandel, Melissa } & 74,200 & 3,200 \\\text { Davenport, Vin } & 27,500 & 1,800\end{array}$

Question 65

The adjustment to journalize an additional premium due at the end of the year for workers' compensation insurance (WCI)is

A) debit WCI Expense and credit Cash.
B) debit WCI Expense and credit Insurance Refund.
C) debit WCI Expense and credit WCI Payable.
D) debit Insurance Payable and credit WCI Payable.

Question 66

The payroll register for Automotive Service Center for the pay period ended June 30,20--,showed the following: $\begin{array}{lr}\text { Total Earnings } & \$ 623,000.00 \\\text { Taxable Earnings: } & 4,500.00 \\\text { FUTA } & 4,500.00 \\\text { SUTA } & 574,000.00\\\text { Deductions: } \\\text { Federal income tax } & 91,800.00 \\\text { Social Security tax } & 35,588.00 \\\text { Medicare tax } & 9,033.50\\\text { Pension plan } & 4,800.00\\\text { Health insurance } & 16,200.00\\\text { United Way }& 12,000.00\end{array}$

The Social Security tax rate is 6.2%,Medicare tax is 1.45%,FUTA tax is 0.8%,and SUTA tax is 5.4%.
Required:

1.Prepare a journal entry to record the payroll on June 30,20--.
2.Prepare a journal entry to record the employer's payroll taxes.

Question 67

____________________ provides insurance for employees who suffer a job-related illness or injury.

Question 68

By January 31 of each year,employers must provide each employee with a Wage and Tax Statement called ____________________.

Question 69

R.L.Ybarra employs John Ince at a salary of $53,000 a year.Ybarra is subject to employer Social Security taxes at a rate of 6.2% and Medicare taxes at a rate of 1.45% on John's salary.In addition,Ybarra must pay SUTA tax at a rate of 5.4% and FUTA tax at a rate of 0.8% on the first $7,000 of Ince's salary.Compute the total cost to Ybarra of employing Ince for the year.

Question 70

Taxes levied on employers at the same rates and on the same earnings bases as the employee Social Security and Medicare taxes are known as ____________________.

Question 71

Ryan's Sparkling Jewels estimated its payroll for the coming year to be $84,000.Its workers' compensation insurance premium rate of 0.6% is paid at the beginning of each quarter.
Required:
1.Calculate the estimated cost of workers' compensation insurance for the year.
2.Show the journal entry for the first quarterly payment on January 2,20--.
3.Assume Ryan's actual payroll for the year was $89,000.Calculate the additional premium owed for 20--.Record the adjustment needed on December 31,20--.The actual payment of the additional insurance premium will not take place until January of the following year.

Question 72

Compute the amount of employer Social Security taxes by multiplying the Social Security taxable earnings by ____________________.

Question 73

The cost of workers' compensation insurance for the employer depends on all of the following EXCEPT

A) the number of employees.
B) the riskiness of the jobs the employees perform.
C) the company's accident history.
D) the amount of FICA,FUTA,and SUTA taxes due.

Question 74

Employer payroll taxes include FUTA,SUTA,and ____________________ taxes.

Question 75

Mark Turney owns Creative Corners.He does his banking at United Federal Bank (UFB)in Tucson,Arizona.The amounts in his general ledger for payroll taxes and the employee's withholding of Social Security,Medicare,and federal income tax as of April 15 of the current year show the following: Social Security tax payable (employer and employee),$3,020; Medicare tax payable (employer and employee),$734; FUTA tax payable,$84; SUTA tax payable,$414; and Employees income tax payable,$4,622.Journalize the payment of the Form 941 deposit to UFB and the payment of the SUTA tax to the State of Arizona as of April 15,20--.

Question 76

The ____________________ encourages employers to provide regular employment to workers.

Question 77

A(n)____________________ identifies the employer on all payroll forms and reports filed with the IRS.

Question 78

The payroll register for Star Express & Company for the pay period ended January 31, 20--, showed the following:
$\begin{array} { l r } \text { Total Earnings } & \$ 834,000.00 \\\text { Taxable Earnings: } &\\\text { FUTA } & 6,700.00 \\\text { SUTA } & 6,700.00 \\\text { Social Security } & 787,000.00\\\text { Deductions: } & \\\text { Federal income tax } & 129,600.00\\\text { Social Security tax } & 48,794.00 \\\text { Medicare tax } & 11,411.50 \\\text { Pension plan } &38,450.00 \\\text { Health insurance } & 23,400.00 \\\text { United Way } &16,000.00\end{array}$
$\text { The Social Security tax rate is } 6.2 \% , \text { Medicare tax is } 1.45 \% \text {, FUTA tax is } 0.8 \% \text {, and SUTA tax is } 5.4 \%$

Required:
1. Prepare a journal entry to record the payroll on January 31, 20--.
2. Prepare a journal entry to record the employer's payroll taxes.

Question 79

Selected information from the payroll register of Barbara's Stables for the week ended September 28,20--,is as follows: Social Security tax is 6.2% on the first $110,100 of earnings for each employee.Medicare tax is 1.45% of gross earnings,FUTA tax is 0.8%,and SUTA tax is 5.4% each on the first $7,000 of earnings.

$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text {Cumulative Pay} \quad\text {Current}\quad\quad\quad\text {Taxable Earnings}$$\begin{array}{lcr}&\text { Before Current} & \text { Gross } & \text {Unemployment } & \text {Social }\\\text { Employee Name } & \text { Earnings } & \text { Pay } & \text { Compensation } &\text { Security }\\\text { Carlosi, Peggy } & \$ 84,240 & \$ 2,350 \\\text { Sanchez, Carmela } & 81,900 & 2,100 \\\text { Delaney, Roger } & 109,800 & 3,320 \\\text { Weitz, Alana } & 6,300 & 1,100 \\\text { Dunhill, Craig } & 6,800 & 1,000 \\\text { Bella Stephen } & 42,330 & 1,850\end{array}$ Calculate the amount of taxable earnings for unemployment and Social Security taxes,and prepare the journal entry to record the employer's payroll taxes as of September 28,20--.

Question 80

A system for making federal tax deposits electronically is called the ____________________.