10-1. Unit 10 State Payroll Taxes and Reports McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill...

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.

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10-4


• 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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• 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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• 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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• 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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• 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


• 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.


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


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.


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.


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.


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.


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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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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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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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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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.


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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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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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.


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.


10-27

Setting Up a Payroll Calendar

10-28

Unit Summary

10-29

Questions?

10-1. Unit 10 State Payroll Taxes and Reports McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill...

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