An employer must withhold federal income taxes on both the tips reported by tipped
employees and the tips that the employer allocates to the employees.
A debit to the employees FIT payable account removes the liability for the amount of
federal income taxes withheld from employees wages.
The FLSA contains detailed specifications of the methods that employers must follow
in keeping time records.
Under the Federal Personal Responsibility and Work Opportunity Reconciliation Act,
every employer is required to report the name, address, and social security number of
each new employee to the appropriate state agency.
Form I-9 must be completed by each new hire.
Employees may use Form 4070 to report the amount of their tips to their employers.
The FLSA defines a tipped employee as one who regularly receives tips of more than
$20 a month.
The requirements for depositing FICA taxes and income taxes withheld from
nonagricultural employees wages vary according to the amount of such taxes reported
during a lookback period.
NOTE: In all problems, unless instructed otherwise, compute the hourly and overtime
rates as follows:
1) Carry the hourly rate and the overtime rate to 3 decimal places and then round off to
2 decimal places (round the hourly rate to 2 decimal places before multiplying by one
and one-half to determine the overtime rate).
2) If the third decimal place is 5 or more, round to the next higher cent.
3) If the third decimal place is less than 5, drop the third decimal place. Also, use the
minimum hourly wage of $7.25 in solving these problems and all that follow. Jack
Kentson works a 40-hour week with overtime paid at 1½ times his regular rate of pay of
$14.88.
Employees who are receiving remedial education may work up to 10 hours overtime
each week without receiving overtime pay.
Under FICA only, cash tips of more than $100 in a month are defined as taxable wages.
Under ERISA, if there is a pension plan, every employee is eligible after reaching age
21 or completing one year of service, whichever is later.
Payments made to a bona fide profit-sharing plan that meets the standards set by the
secretary of labors regulations are not deemed wages in determining the regular rate of
pay.
Tax withholdings from employees pays reduce the amount of the debit to Salary
Expense in the payroll entry.
FICA defines wages as including the cash value of meals provided for the convenience
of the employees.
The FLSA requires that employees be given at least two 15-minute rest periods each
workday.