10-1. unit 10 state payroll taxes and reports mcgraw-hill/irwin copyright © 2006 the mcgraw-hill...
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10-1
Unit 10Unit 10
State Payroll Taxes and Reports State Payroll Taxes and Reports
McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
10-3
State Unemployment Compensation
• Social Security Act of 1935:– established the federal unemployment insurance
system, – states set up their own unemployment insurance
programs.– state programs operate in partnership with the
federal system.
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
10-4
State Unemployment Compensation
• State programs:– Each state maintains:
– local unemployment insurance offices that handle the claims from jobless workers,
– check those claims,– and pay benefits.
– Each state sets its own rules:– with regards to eligibility– amount of benefits,– and length of the payment period.
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State Unemployment Compensation
• SUTA Tax and FUTA :– the federal government allows a credit of up to 5.4%
of the state unemployment insurance (SUTA) tax to be paid by the employer.
– the amount of FUTA tax actually owed may be as low as 0.8%
– (6.2 percent — 5.4 percent = 0.8 percent).
– The tax rates imposed by state unemployment compensation laws vary.
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10-6
State Unemployment Compensation
• SUTA Tax: – states have an experience-rating (or merit-rating)
plan that affects the amount of SUTA tax employers pay.
• formula used to determine experience ratings varies from state to state,
• some states allow employers to make voluntary contributions in order to obtain better ratings.
– SUTA tax computed and paid on a quarterly basis.
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10-7
State Unemployment Compensation
• SUTA Tax Example:Here is how the SUTA tax would be computed:
$ 49,084 total taxable earnings of employees x .021 applicable SUTA tax rate
$1 ,030.764 = SUTA tax
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10-8
State Unemployment Compensation
• Unemployment Benefit Claims (California) :– The state immediately sends a notice of claim to that
person’s last employer. – Applications are made at one of the state’s many
employment development offices. – The employer verifies the information.
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10-9
State Unemployment Compensation
• Unemployment Benefit Claims (California) cont. – A state unemployment counselor interviews the claimants. – Focus of the interview is to determine the reason why the
claimant lost his or her job. – Only claimants who are unemployed through no fault of their
own are entitled to benefits. – Claimants who have been discharged for misconduct or
voluntarily quit do not receive unemployment benefits.
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10-10
State Disability Insurance Tax
• State Disability Insurance Tax:– an employee who is unable
to work because of non-related:
– illness, – injury, – or accident.
• In some states, both employers and employees pay disability insurance tax
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10-11
Workers Compensation Insurance
• Workers compensation insurance:– developed to protect employees and their families
against the loss of income that results from job-related injuries, illnesses, or even death.
– Most states have laws requiring employers to provide workers compensation insurance for their employees.
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10-12
Workers Compensation Insurance
• Premiums on Workers Compensation Insurance,– one common practice is for employers to pay the
insurance company an estimated premium at the beginning of each year.
– The estimated premium is based on the rate for each type of employees and the estimated amount of their wages for the year.
– At the end of the year, the premium is adjusted according to the actual payroll for the year.
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10-13
SPECIAL STATE PAYROLL TAXES
• Special kinds of state taxes for employers:– California imposes an Employment Training Tax
(ETT), which is paid by employers on a quarterly basis.
• This tax is used by the state to finance training for both employed and unemployed workers.
• The rate of the ETT is 0.1 percent (.001) of the first $7,000 earned by each employee during a calendar year.
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10-14
State Income Tax
• State income taxes:– Each state determines:
• the rates used, • the depositors schedule, • and the tax forms to be filed
• Obtaining information about State Income Tax– Most states publish a tax guide for employers.
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10-15
State Income Tax
• Depositing and Reporting State Withholding Taxes:– forms and procedures used to deposit and report the various
withholding and payroll taxes differ from state to state.
– The payroll-related taxes in California are:• Unemployment Insurance (SUTA, which is called UI in California)• Employment Training Tax (ETT)• State Disability Insurance Tax (SDI)• California Personal Income Tax (PIT)
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10-16
State Income Tax-CA
• SDI and PIT deposits:– by electronic funds transfer (EFT). – employers who owed more than $20,000 in the last
lookback period (July 1 to June 30) are required to use EFT.
– A special bulletin is available explaining how the EFT system in California works and what employers must do to join the system.
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10-17
State Income Tax-CA
• Due Dates for Depositing State Withholding and Payroll Taxes:– employers are classified based on their federal
status as:– next banking day, – semiweekly, – monthly, – quarterly depositors.
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10-18
State Income Tax-CA
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State Income Tax-CA
• Quarterly Wage and withholding report: – Form DE 6, Quarterly Wage and Withholding Report.
• provide in formation about the wages paid to each employee during the quarter and the California personal income tax (PIT) withheld from those wages.
• The due dates for filing are April 1, July 1, October 1, and January 1.
• must be submitted even if no wages were paid to employees during the quarter.
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10-20
State Tax- CA
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State Income Tax-CA
• Quarterly Wage and withholding report: – Form DE 6, Quarterly Wage and Withholding Report.
• provides information about:– wages paid during the quarter – California personal income tax (PIT) withheld .
• The due dates for filing are 4/1, 7/1, 10/1, 1/1.
• Must be submitted even if no wages were paid to employees during the quarter.
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10-22
State Income Tax-CA
• Form DE 7 (Annual Reconciliation Statement):– report is due on January 1 of each year and
delinquent on January 31.
– purpose is to reconcile the various state payroll and withholding owed for the year with the amounts deposited during the year.
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10-23
State Income Tax-CA
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State Income Tax-CA
• WAGE AND TAX STATEMENTS– California required that employers submit a copy of a
W-2, to report the state income tax withheld from the employee’s earnings during the year.
– must also list the California Disability Tax withheld (CASDI).
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10-25
State Income Tax-CA
• LOCAL INCOME TAX– cities and counties impose an income tax on
residents who work within their boundaries.– local governments publish tax guides for employers.
• provide detailed information about:• regulations, • forms, • and payment deadlines.
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10-26
Setting Up a Payroll Calendar
• Calendar of payroll activities:– is an important tool – surest way to avoid missing the date for making a tax
deposit or filing a tax report is to set up and use a payroll calendar.
– It is helpful if calendar also includes the dates when the payroll must be computed and checks must be issued.
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10-27
Setting Up a Payroll Calendar
10-28
Unit Summary
10-29
Questions?