Chapter 5 Payroll

Go to http://www.ssa.gov/history/organiza.html and use the information found there to fill in the blanks below.

The Social Security Administration (SSA) began life as the Social Security Board (SSB). The SSB was created when President 1_______________ signed the Social Security Act on August 14, 1935 at 3:30 p.m. 2________________ was the first board member of this administration. The board itself consisted of 3_____ presidentially appointed executives with the option to hire additional staff as needed.

At that time, the use of Social Security numbers was not mentioned. However, an undefined type of record-keeping system was authorized. It was in 1936 that a Treasury Department regulation required the issuance of an account number to each employee covered by the Social Security program. At that time, the Social Security Board considered different numbering systems and ways by which employees could indicate they had been issued a number. Between 1936 and 1937 approximately 30 million applications for Social Security numbers were processed. 4__________________is believed to be the first person to have received a Social Security card. Fred Happel of Albany, New York designed the original Social Security card in 1936. Mr. Happel was paid only 5_____ for his work. It was not until 1962 that the Internal Revenue Service adopted the Social Security number as its official taxpayer identification number. When the Internal Revenue Amendments of 1965 created Medicare, it became necessary for most individuals age 65 and older to have a Social Security number. Not only did the Social Security Act enable the government to keep a record of contributions, the act also became a verification system to establish income. This information is used to determine eligibility for benefits under programs such as TANF (Temporary Assistance for Needy Families), Medicaid, unemployment compensation, and the food stamp programs. In 1986, the Commercial Motor Vehicle Safety Act authorized the secretary of transportation to require the use of Social Security numbers on commercial motor vehicle operators' licenses. Higher Education Amendments of 1986 required that student loan applicants submit their Social Security number as a condition of eligibility.

By now, it is evident that Social Security numbers are an element of everyday life. Ask anyone, and they will likely know their nine-digit Social Security number. By 1986, taxpayers filing a tax return had to include a Social Security number for each dependent age 5 or older. What began as a program to help individuals survive during rough economic times in the United States has since developed into a complex system.

Some predict that the system will run out of money to pat benefits by 2032, while others are not sure. One thing that is known for sure is that the system is paying out more benefits than it is taking in due in part to the fact that people are living longer lives.

All this information and more can be found at http://www.ssa.gov/history/organiza.html.

Problem:

Preparation:

In preparation for this problem, you will have to read the information found on the Web site. Use the information you found to fill in the blanks in the introduction to the Social Security Administration above. This 'Net Asset problem focuses on:

• Reading for information
• Locating information
• Recording information accurately

Questions:

1. 1. Employers are required to give workers a statement of earnings (called a W-2 form) each year before the end of January. It is important that the Social Security number and name on an employee's W-2 form is correct. Go to www.ssa.gov/mip/97janthm.html#Jan Release3, and explain why a discrepancy on your W-2 could affect your record of earnings and eventual Social Security benefits.
2. 2. While the Social Security tax is automatically deducted from your earnings in most jobs, some types of jobs require special reporting.
   1. (a) Discuss the types of jobs that require special reporting.
   2. (b) Discuss the rules that apply to those who are self-employed.
3. 3. Social Security recommends that everyone check his or her Social Security earnings at least once every three years. After that it becomes more difficult to trace earnings. Test your knowledge on this important part of life by answering the following questions.
   1. (a) What percent of your wages will go for Social Security and Medicare taxes in 1999.
   2. (b) How much does your employer contribute to Social Security on your behalf?
   3. (c) Your earnings are the basis for your benefit amount. If you have average earnings during your working life, your benefits will replace how much of your prior earnings?
4. 4. The most misused Social Security number of all time was 078-05-1120. Go to www.ssa.gov/history/misused.html and explain the history of this number.
5. 5. Referring back to Chapter 5 in your textbook, calculate the answers for the following questions.
   1. (a) Lauren Chambers earns a gross salary of $2750 each week. In Week 28 what will Lauren pay for Social Security and Medicare taxes?
   2. (b) Deanna Hamilton's earnings are subject to deductions for Social Security, Medicare, and federal income tax. Hamilton is $700 below the maximum for Social Security. What will her net pay for the week be if she earns $950? Hamilton is married, paid weekly, and claims two withholding allowances. Assume that the Social Security rate is 6.2% on $72,600 and Medicare is 1.45%.

Include the date in your answers.

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