 So caution, if you use Form 1099 NEC to report sales totaling $5,000 or more of consumer products then you are required to file Form 1099 NEC with the IRS by January 31st. Form W2. You must file Form W2 to report payments to your employees such as wages, tips and other compensation and withhold income social security and Medicare taxes. So the W2 is probably the most common form that we know of but it's still quite complicated. Remember that there's a big difference between doing an employee situation having to withhold money, process payroll taxes, deal with the 941s, the 940 issue in the W2 and the W3 and then just giving someone a 1099 form. It's a lot easier to give someone a 1099 form. But so keep that in mind. It doesn't mean you don't want to have employees. Just note there's a big difference. There's pros and cons to both of those formats. So you can file Form W2 online for more information about Form W2. See the general instructions for Form W2 and W3. Just want to note when you're dealing with payroll, if you're thinking about taking on payroll, it's a mess. And it's not the easiest thing to do. So you want to generally think about how you're going to do that well first, meaning do you want to process the payroll through your tax software? Do you want to hire a third party payroll provider to help you process payroll? And I would first talk to someone that is not related to the person you're going to be paying for payroll, such as a CPA firm or something, asking them what's my best options to deal with payroll and then set it up properly the first time because problems with payroll is the most likely area that small businesses get sued on and stuff like that. So you want to make sure that it's set up properly from the get go if possible, which a lot of small businesses get hung up on. Okay, so penalties. The law provides for the following penalties. If you do not file Forms 1099 Miscellaneous, Forms 1099 NEC or Forms W2. So obviously the question here, as always, is what if I don't? What if I don't do that? Well, then they hit you with the sticks of penalties and interest, right? We're trying to avoid the sticks here. It's not like we're doing this just because, right? It's not helpful to the business to have to do these things. They're forced to do these things. And why? Because we're trying to avoid getting hit with sticks or do not correctly report the information. So for more information, you can see the general instructions for certain information returns. So failure to file information returns. This penalty applies. If you do not file information returns by the due date, do not include all required information or report incorrect information. Now note, you might be asking, well, how would they know if I don't do an information return, right? But clearly, if you have a W2, I mean, if you have like your schedule C, on your schedule C, you want to deduct because these are going to be huge deductions what you paid either an employee or a contractor. How are you going to do that? Well, if they're an employee, you would probably call it wages or payroll. Now if you put something on your schedule C that you deducted like 50,000 of payroll expenses and you don't report W2 forms, you see there's a problem. That's why the IRS has a leverage. The IRS can see that you want to deduct the payroll. If you want to deduct the payroll, you have to process the payroll and be their tax collector and issue forms W2. If you have a contractor situation, same thing, you might have paid $50,000 in contractor fees. Where are you going to deduct that? You're going to deduct it as contractor fees or something like that. And then if the IRS sees you've got 50,000 in contractor fees, but you didn't process any 1099 forms, they're probably going to be like or they could quite likely ask how that's why the IRS has the leverage, right? Because they're going to see the deductions and therefore they have the leverage. Do you want those deductions? They have the leverage to make you into their tax collector collector or at least a rat. Rat, not who you paid. In it goes. Failure to furnish correct payee statements. So this penalty applies if you do not furnish a required statement to a payee by their required date. Do not include all required information or report incorrect information. So then you got the waiver of penalties. So these penalties will not apply if you can show that the failure was due to reasonable cause and not willful neglect. This is often the case in law where the question is intent, which is a very difficult thing to determine. But if it was just neglect, I didn't do it. I didn't know. Then you're going to have less of a penalty oftentimes than if they say if it was intentional and so on. So in addition, there is no penalty for failure to include all required information or for including incorrect information on a de minimis small number for information returns. If you correct the error by August 1st of the year, the returns are due. So meaning a de minimis amount, you were off, you made an error, but it wasn't that big of an error. It's not material in comparison to the total dollar amounts as they determine it and you fix it. So a de minimis number of returns is the greater of 10 or one half of 1% of the total number of returns you are required to file for the year. So that's a pretty small number.