 In this presentation we will reconcile our year end payroll forms and in essence double check that they've been filled out correctly. So we have here our forms 941 and the W3. These are the two forms that we can use to reconcile each other and make sure that the two forms have been filled out correctly. We can double check in other words our quarterly form by tying it out to the W3 and vice versa. Check the W3 to the quarterly forms. Remember what these quarterly forms are doing is they are calculating the three main taxes which are the FIT, federal income tax for the employees, the social security tax for employees and employer, and the Medicare tax for employees and employers. This is going to be done on a quarterly basis so we've got January, February, March, April, May, June, July, August, September, October, November, December, or quarter four, quarter three, quarter two, quarter one. The W3 of course is just a yearly form that will be reported at the end of the year summarizing all the W2s that we send to both the employees and the IRS. So what we can do is double check these forms because we can see here on the totals here we have the total wages, social security, and Medicare wages as well as the calculations for federal income tax, social security tax, and Medicare taxes which have been withheld. So to do that we're going to try to match these up. Now what we don't show here is the 940, the form 940 which is the year end form and that's because it's reporting FUTTA which is just a tax for is an employee or only tax and therefore not reported on the W3. It is possible for us to kind of compare the FUTTA wages but we still have to do some reconciling to make sure that we're picking up the correct wages on the FUTTA form which is a yearly form, the form 940. So common misconception would be that the quarterly forms, the 941s, the IRS wants us to report everything quarterly and then summarize that same information again on the yearly form 940. Not necessarily the case, the forms 941s report the three main taxes, the big taxes, the FIT, federal income tax, social security, and Medicare which the IRS wants to see on a quarterly basis whereas the form 940 reports a tax that's usually a lot smaller FUTTA federal unemployment tax and therefore the IRS is happy or content enough I guess just to see that reported on a yearly basis rather than on a quarterly basis. So they're actually two different things for reconciling there. So if we look at what we have these we have quarter three and quarter four in this example we only have two quarters rather than four quarters and that will make it a little bit easier for us to show how this reconciling process would work. If we had four quarters of data then of course we would just add up the four quarters of data. So on the 940s over here this box, box two is the wages and tips box and these are really wages and tips for FIT calculation meaning this and this for the two quarters should add up to this box one. So if we were to tie this out to double check everything at the end of the year we're going to say okay the nine one four two five point one plus the one three five nine oh nine point nine should add up to the two twenty seven three three five and you might even I even subtracted sometimes two two seven seven three three five minus that should go to zero so that would tie out and then we're taking a look at the federal income tax withheld box three should tie out to the federal income tax box two on the w3 now again you can't tie this number to this number because it's too complex because it'll change by employee but we can sum them up and double check that way so again it's not a flat tax so we can't do a simple calculation from the wages to the tax we can take the one seven over three point two six plus the two five two one two point four and that should give us the forty two two fifteen sixty six if we subtract that forty two two fifteen point six six back to zero then we'll take the social security wages so we have the social security wages here and here that should tie out to social security wages here on the w3 so if we were to add the social security wages up we're adding the nine six nine seven three point five and the nine seven six three two point five to get the um 194 606 so if we subtract out what we have 194 606 back down to zero and then we're looking for the social security here now this is where it gets a little bit complex this is the actual tax and uh it this could differ from the tax that we're going to see over here so let's see why we're going to add up the 12024.71 and down here the 1206.43 and that's going to differ and it will always differ by the way the 12065 57 why because we multiplied this by twice the amount this in other words is not 0.062 but 0.124 or twice the wages in other words it's the employer and employee portion so if we take this amount and divide by two we'll get just the employee portion which is what's reported on the w2s and the w3 same's going to be here so this is the medicare taxes on these two lines if we add those two lines we're going to say that's the nine six nine seven three point five plus the 144232.5 giving us the 241 206 so if we subtract that out 241 206 back down to zero and then we're going to do the same calculation for medicare wages so we will add those two up okay so that's going to be and hit something funny there I'm not sure so 2812.23 plus the 4182.74 that's the 699497 again that's going to differ from what we have here because we see this rate of 0.029 which is really twice the rate that we typically would probably know 0.0145 because it's both the employer and employee portion therefore if we take this number and divide by two we're going to get the 3497 which is the number we want the 3497 these are the numbers that we can generally reconcile in most cases now there may be some reasons why these numbers would differ and if there were we'd want to make a reconciliation to know exactly what the differences are so when questioned if questioned which we quite possibly could be by the IRS in terms of some type of audit we could give responses to any kind of differences between the W3 and the 941s. Remember once again that we're talking about we only had two 941s here because it was our first year of operations our first year of payroll and we only had two quarters if we had four quarters we would have to add up the four quarters then we're having the form 940 which we can't tie out as neatly with with the other forms the W3 and the W2s why because the W3s and the W2s are employee taxes and this form is an employer tax and they don't tie out also to the quarterly forms the 941s because those report different taxes they report federal income tax social security and medicare so the 941s do report some employee error taxes their portion the employer portion of social security and medicare but doesn't report the employee error tax of FUTA this is the only tax form that reports the employee error tax of FUTA we can however look at the total payments for all employees the total compensation and try to reconcile that in some way to the amounts that are on the W3 and the 940 it may not reconcile exactly to any particular box it be closest to box to the medicare box on W3 but it could differ by a cafeteria plan but we can reconcile that difference and know what the difference would be between the total payments here and the medicare calculation on box three of the W2s and the W3 and box three of the W2s and the W3 would of course also reconcile to adding up the 940s which we just did on box 5c in part one off the payroll you