Tax And Payroll

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Tax And Payroll

  1. 1. Anish Desai Principles of Business Chapter 6
  2. 2.  Gross pay is what you make for the hours you work  Netpay is what is left after the withholding of deductions (such as health insurance or wage garnishments) and taxes owed by the employee
  3. 3.  Life nsurance for self, spouse, or children  Long-Term Disability Insurance  Long-Term Care  Credit Union
  4. 4.  Formwith many columns that contains and summarizes payroll information (amount of money paid to employees less deductions) Information includes employee's name, regular  hours, sick hours, overtime hours, federal income taxes withheld, medical insurance deductions, union dues, gross pay, and net pay  Itis important because it keeps a record of a person’s employment career
  5. 5. Step 1: Determine if you are required to pay FICA tax. Any person who is in a  standard employee/employer relationship is required to pay tax on all taxable income. Anyone completing work which is considered employment under FICA law or receives funds as compensation for time spent are also required to pay FICA taxes Step 2: Calculate your total taxable income for the pay period. This includes all  earning as part of an employee/employer relationship, such as tips, commissions, overtime, piecework earnings and any taxable benefits. Deduct any heath and dental premiums from this amount, as they are non-taxable. Step 3: Look up the current percentage taxation rate for OASDI and the Medicare or  Hospital Insurance Program. These rates are updated and maintained by the Internal Revenue Service, complete with instructions on the method used to calculate the amounts to be deducted from your pay. Step 4: Multiply the current percentage tax rate against the taxable earnings for the  period for both OASDI and Medicare or HI to calculate the amount of the deduction. The rates and limits differ between the two programs, although they are combined in the FICA tax amount Compare the amounts deducted from your payroll statement against your  calculation to ensure that the correct limits and percentages are used
  6. 6.  0.8% of the first $7,000 paid to each employee each year. This means you pay $56 if you have one employee who works all year for $70,000 or $560 if you have 10 employees who earn $7,000 each. You get the same kind of hit only worse from state unemployment tax if you churn employees
  7. 7.  SocialSecurity and Medicare taxes that were to be withheld plus your company’s matching of those taxes
  8. 8. Step 1:Determine whether you have to file a federal income tax return. If your income is low, you may not  have to file. But even children have to file if they meet certain income levels or have certain types of income. Step 2: Find out what filing status you qualify for. In some circumstances you have a choice of filing  statuses. Some filing statuses are better than others. Step 3: Determine how many personal and dependent exemptions you have. Personal exemptions are for  yourself and your spouse. Anyone can be your dependent if he or she qualifies. Step 4: Calculate your income. Many types of money you receive can be taxable income, but some types  are not. Step 5: Calculate your income adjustments. You are allowed to subtract some things from your income and  lower your taxes. Step 6: Calculate your deductions. You can choose between a standard deduction and itemized deductions.  Deductions lower the amount of your income that is subject to taxes. Step 7: Determine your income tax. Taxable income minus adjustments, minus deductions, and minus  exemptions equals the income on which you are taxed. Tax tables or schedules will tell you how much your income tax is. Step 8: Determine your credits. You can get credits against your income tax for certain situations or  expenses. Step 9: Determine your additional taxes. In some circumstances - for example, if you are self-employed -  you may have to pay additional taxes. Step 10: Find out your total payments. This includes taxes withheld by your employer, estimated tax  payments you made, and the earned income credit. The total is how much you have paid or has been paid for you. Step 11: Find out the amount you have overpaid or underpaid. This will be your refund or the amount of  tax you still have to pay. You could have a penalty for underpaying your taxes, but only if you were off by a significant amount. Step 12: Get the right tax forms and fill them out 

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