 In this presentation, we will record a transaction related to paying payroll taxes. In other words, within our practice problem, we're going to say that payroll has been processed for the month of January. We withheld taxes on that payroll and we have our employer payroll taxes. We're imagining the process is being helped by a third party to help us process the payroll, such as an ADP or a Paychex. Now we're going to be paying off those payroll taxes. It's time to engage with SAGE. Here we are in our Get Great Guitars file. We're currently in the Customer and Sales section. We're going to go on down to the Employee and Payroll section. So note that in our practice problem, we're not actually processing the payroll through SAGE. We talked about the options to do so. It typically would be an add-on type of feature and we want to keep this so that we don't have to pay for the add-on features if you wanted to follow through with it. However, we are assuming in our practice problem that we have payroll processed and it's going to be helped to do so with like a third party like a Paychex or an ADP and then we took their report, entered that into our system. So if we go then to our reports here, this is going to be like a really kind of simple report that you could think about what you would get from an ADP or Paychex and we have our two employees and you'll recall last time that we took this report, we entered this into our system. The idea being that we want ADP or Paychex to be able to provide the detailed information, which is going to include the gross pay and the withholdings for every check, for every employee on a check-by-check basis as well as a year-to-date basis. What we want in our system for financial reporting purposes is we need the financial statements to be right, which you could enter into our system with just basically one journal entry kind of assuming as if you had one giant employee that was making all the payroll so that the financial statement balances would be right so that we can have our financial statements correct and then go to ADP or Paychex or whatever third-party payroll process that we're using for the more detailed information check-by-checks employee by employee. However way you want to look at it, whether it be run through Sage or whether it be done by a third party, we are going to have to take these withholdings. So these withholdings because the government makes us. So we're going to have to take these out, the federal income tax withholdings, which include the Social Security Medicare income, this is going to be what's been taken out of the employee checks here and so and we had to put them into a payable account. So we say we're going to owe those. This is this is the amount that was earned by our two employees Adam and Erica like in theory again this is in economic terms this is you know obviously changes the negotiation but if you're this is what in theory has been earned by them and we took from them because we're forced to for the federal taxes and that's what now is in the payable account then we had to pay over and above our employer taxes of the 307 and the 77 which is the 384 so that means we owe to the Fed at this point this and this which is the 1598 which should be reflected in a payable account in our system. Now note that same kind of issue with the payable account for the for the payroll payable as with the sales tax it's there's a question as terms of how often do you have to pay it in other words the more employees you have same kind of thing the more money that's going to be going through the system the more likely the IRS is going to say I want my money sooner right I want my money sooner but and also if you have different payroll periods we're going to be paying monthly here if you pay weekly then you may have to you may have to make you know payments more often to the government if you pay semi monthly or or bi weekly then again you'll have to see what the terms are depending on how much your payroll is and how often you have to pay. We're going to say here that we make we pay payroll monthly so we've only may have had one payroll for January and now we're going to have to pay it sometime in the end of February so that's just going to be how our system is going to work so we've run payroll for January we haven't run payroll for February yet we have a payable now because we withheld money and we have our payable and now we owe that to the government and we're only processing the federal government if you had a state government that'll change states to state the federal government has breaks the money that they take for payroll taxes into these categories of Social Security Medicare and the federal income tax so that's what we have now let's take a look at our reports then our financial statement let's go to the reports drop down and go on down to the financial statements over here and then open up the old balance sheets let's open up the old balance sheet as of February so we want to take a look at the month of February February and then go down to the liabilities so there's what we owe so there's the 1598 now that's all for for for the month of January because we haven't run February payroll yet and we only do the payroll once a month in our system here we only we only pay people once a month our employees would like to get paid more often we've been discussing it with them whether we should pay them by week anyway so we've got the 1598 so we're gonna be paying that to them now we're just gonna write a check and I'm gonna I'm just gonna write a check to the Fed on it so let's go back over I'm gonna go back to the first tab here so I'm gonna write checks to do this I'm actually gonna write three checks just so you can see I'm gonna go back up to the vendor and purchase this section so you can see kind of a breakout so I'm gonna write a check for Social Security Medicare and federal income tax even though it's all going to the same place and that's just going to the IRS just so you can see that breakout for the three components or types of taxes so I'm gonna go to the right to check it's also gonna help us with our bank reconciliation because I want to have some more items for the bank wreck so we're gonna go to the new check so we're gonna be writing a new check we're gonna add a new vendor up top so I'm gonna say a new vendor so let's put a new vendor here because we haven't we haven't written any any checks for the payroll as of yet and then let's put the ID is gonna be just I'll just put the IRS here IRS and then it's gonna be the name I'll put the full name here internal revenue service you have to say it with like a menacing voice because they're kind of scary so that's gonna be that and then the expense account is going to be will pick up the actually the liability account here so I'm gonna go back up top I'm looking in the liability accounts federal payroll tax payable that's the one we want that's gonna be the default and then that looks good so I'm gonna save that and then close this back up so close this back up and then we're gonna put in the IID the IRS and then I'm gonna tap through this here and number I'll just put a number up top for a practice problem and then I'm gonna make this on the 29th and then the dollar amount is gonna be I'm gonna break this out like and I'm gonna say okay social security it's gonna be the employee portion and the employee or portion so that comes out to the 614 of the 614 614 614 614 614 so I'm gonna put that 614 here and there we have this is gonna be the social security payroll tax and the other side is gonna be going to this here so the split it's going to the federal taxes payable so there is that so we're gonna say that looks good let's save it so we're gonna save that and let's do it again we're gonna make another one to the IRS and it's gonna be for let's make this 729 and then let's make this for the Medicare portion so that's gonna include the Medicare that we took from the employees because they made us and then our portion that we had to match the 154 the 154 so that's gonna be the amount here the 154 154 and this is gonna be Medicare Medicare payroll tax so that's gonna decrease the the account I have the checking account right yeah so it's going out of the right account and the other side is gonna be decreasing the payable so let's do one more so we're gonna say one more and this is going to be going to the IRS as well and this is gonna be for the amount of just the federal income tax now this is only the employee portion this isn't our tax we have to pay because we had to pay federal income tax to as the company but this is what's what they have to pay for the employee federal income tax and there's no matching on our side for their federal income tax we pay our federal income tax on the in on our net income so that's gonna be the 830 so that's gonna be 830 830 and this is gonna be the FIT federal income tax payroll tax and that's gonna be that that looks good let's save it let's go ahead and save that and then let's close this back out gonna close this back out we're gonna go back on over to our balance sheet and see what happens on what's going on over there on the balance sheet and then if we go down we're gonna say that the federal taxes has disappeared because there we paid them now so if we want to see that and drill down on it we can go to the little cog up top and I'm gonna say hey I'd like to see the zero numbers so I can use the zoom feature so I want to see the zero numbers and say okay and then we're gonna go back up and you're gonna see that now we have the federal taxes pay of the run the assets section up here we have the federal taxes payable here I'm gonna double click on that zero and so there we have it so we have our three checks that we paid off now if I open this up and just take a look at it for January and February for the two month time period and then say okay so now we have the the Adam and Erica so right this is the amount we took from Adam this is the amount we took from Erica for their payroll in January this is our portion that we had to pay that we had to incur that increased the liability and then this is our payment so we paid them off and we paid them off grouping them together by Social Security Medicare and FIT federal income tax now bringing the balance back down to zero and then we're gonna we haven't processed payroll for February yet so when we process payroll for February we will once again have a liability for our two employees in our portion of the federal payroll taxes which we will then pay to the government in March but that'll be a beyond our problems so we won't get to see that for that part so that's gonna be it for now let's get out of here