 In this presentation, we will discuss payroll consideration and tax forms. We will discuss payroll considerations a bit more broadly here and then focus in on some of those considerations later. First has to do with the payroll frequency, meaning how are we going to pay people? How often are we going to pay people? We're going to pay people weekly, monthly, bi-weekly, so that's going to be one of the considerations. And when we're a payroll professional, we've got to be able to work with our different types of employers and say, what's your payroll frequency? Many of these questions are going to be ones that once set up, then once we work in a particular company, we'll be the same going forward and we'll be able to get used to the routine. If we work with different companies after a payroll professional, then we would be working with different companies and we'd need to be able to say, okay, what's best for this type of company given the size of the company, given their specialized needs within the company and work with them to implement the best format for different pay frequencies, things like the types of payment. Are we going to use paper checks? Are we going to use direct deposits? And again, those could change drastically in terms of the needs of different companies and how we're going to process payroll for different companies. Note that when we're working with payroll, we learn a lot of different things just based on these little types of changes and little needs that needs to happen for different companies, different industries. And even within payroll itself, as we look at these different types of needs and different types of characteristics, we can become and we'll become specialists just in terms of what type of people we are processing and working in. Advances, are we going to deal with advances and how are we going to deal with those advances and record advances? How are we going to deal with benefits within the payroll process? We'll discuss more of these when we start to calculate payroll. Some of these, of course, become very relevant. We're going to have to deal with the payroll frequency. We'll make a lot of changes in terms of what it's our tax going to look like, how the withholdings are going to happen, when do we have to make withholdings, do we want to have those advances? How are we going to record advances? What's going to be the policy for advances and as well as benefits within the payroll process? Okay, then we have the tax compliance issues. In terms of recording payroll and processing payroll and doing the journal entry for payroll, the tax compliance and the types of tax documentations is one of the major complexities we need to keep aware of. It's important to note that when we're talking about payroll, we're really withholding in many cases money from the employee. And therefore, we have a more heightened responsibility to pay our taxes than even paying our own income taxes as the company. In other words, if we, the company did not pay our income tax, then we would be liable for not paying our income tax. If we don't pay the employee portion of the payroll tax, then it could be said that we in essence stole the money from the employees rather than just didn't pay our taxes. So we could get kind of a double problem there if we withheld money from the employees and didn't pay it. So we want to be very careful with payroll taxes. We want to make sure that we're compliant with payroll taxes. It's also a type of tax that typically needs to be a bit more exact in the calculations, meaning that income taxes, net income might include some type of estimates or more estimates where as payroll taxes, you really need to bring it down to almost the penny or at least the dollar of how close it's going to be. So we need some more exactness in terms of our compliance. So payroll forms that we'll have to do will include the form 940, form 941. These are going to be quarterly forms and then yearly forms for reporting federal income tax. That's going to include FIT federal income tax for the employee. And that's another thing to just make sure that we keep separate when we're talking about income tax. We the employer still pay income tax. If we're a corporation, we pay income tax. If we're a sole proprietor, we it flows through, but we still pay the income tax on our company's business. The federal income tax for the payroll taxes represents the federal income tax for our employees. The payroll tax is very or paying that they will then report that income on their 1040. And then we have the other taxes that are going to be federal taxes, social security, and Medicare. And those two are employer taxes and employee taxes, both the employer and employee pay them. And then the 940 dealing with the FUTA tax, federal unemployment tax. And then we've got the 944, which is really, you really, you really much want to think of the 940 and the 941 as kind of your default forms that you think about when thinking about payroll taxes. The 944 is a nice option for smaller types of companies. And it gives less of a frequency to pay, meaning the 941 has to be paid quarterly, you got to report quarterly. And the 944, if you're a small company, possibly we can limit the reporting requirements and make it a bit easier for small companies to report yearly. But again, the two forms you want to keep in mind, the 941s quarterly, and then the 940, we then have the W2s, and that's probably one we're all familiar with. That's the one we probably know best. That's the one we're going to receive. The employer gets its copy to us. They also give a copy to the government, the federal government as well of all the W2s of all the employees. And from our perspective, you got to recognize it's important or it's useful to recognize what the W2 is. And the W2 for us can be a form of us saying the employer telling us, one, what we've earned and giving us all that information. But two, it's also telling us, hey, I reported this to the IRS when you receive a W2. It basically means this income has been reported to the IRS. You need to report it on your tax return, both as an obligation for yourself as a citizen that earned money. And two, because the IRS has this document that if you don't report it, you will for sure almost almost for sure be notified because we gave a copy to the IRS. Then the form W3, which looks similar and it's related, is really going to just sum up. So if you look at your W2, and you've summed up all the boxes for all the employees, then that's really what the W3 would be. It would be like a summary of all a recap of all employees put together type W2. So if all the W2s were one employee, that's what the W3 would in essence look like. Now there's going to be some relationships with these because if we added up some of the tax, the federal income tax on the 941, that should also be on the W3. We should also see the same type of total wages for the four quarters on the 941, as well as the W3 for all employees. We should also see that the total tax reported on the 940, the yearly tax for Futa. So these are things that should tie out. We should be able to tie out these forms. And it's important to note that it's an interesting to note that or a key to note that because if there's a problem with payroll, often happens at the end of the year because that's when we make the W2s. That's when we make the W3. That's when we make the 940. And if the 941s don't match or don't tie up to that, if we can't add everything up and it doesn't tie out, then we start to worry. I think there might be a problem. So we really want to take care when you're doing the 941s, the quarterly payments to make sure they're done well. And there's no real check figure to know if they're not at the end of the year. However, once we do the calculations for the 940 and the W3s, we have a couple of different checks that we can kind of verify that everything has been done the way it should. And then we've got the form 1099, which is more of a contractor form. And that brings up the issue of whether someone is a contractor or not. If someone is not a W2d employee and they're not a corporation, then we typically have to still report them to the IRS in terms of saying, hey, IRS, we paid them. And that's going to be with the form 1099. And so we'll talk a little bit more about the differences between a contractor or an employee. But in essence, if you get a 1099, it's similar to a W2. The main difference is that the employer is not responsible for taking the withholdings out of the 1099 contractor's wages that are paid to them or whatever their type of payment they're paying. It's contractor wages. They're basically another business. So the employer therefore is not responsible for taking the money out. And as a contractor, you might think that's good or bad. Because if you're a W2 employee, we really don't have to worry about anything. Because if we report the right number of exemptions on the W4, the employer is the one responsible for taking the money out that we owe to the IRS. And we should get a W2 and we shouldn't owe any money at the end of the year. If on the other hand, we're a business and get a 1099, the employer, the people that we work for, the jobs we do, are not responsible for paying the taxes and withholding it. So we need to do that ourselves. So it's a bit extra work. And it could have pros and cons for doing that work, for being the one that reports your own taxes. And then of course, we have state requirements. Now, the state requirements will change from state to state. And the tax rates will change from state to state. Some states have higher tax rates and lower tax rates. But the formats will be much the same. Remember that taxes are taxes. There's not really any new type of tax out there. It's all been done before. It's just a matter of what type of tax is being implemented. Many states will copy or follow the tax structure that is set up for the federal taxes. The type of data that we're going to need for the employee, the type of data that we want to have on file for employees, when especially when we get a new employee, that's going to be the full name, we're going to need the social security number, we're going to need the full address of the employee, date of birth, sex, occupation. So it's going to be just some of the starting information that we're going to need, of course, when we set up new employee, more data that we're going to have to have setting up the new employees. We want to note that the day that the employee begins, that's going to be important date. We want to note that the day that the employees begins, that first paycheck is a little bit more complicated because we do have to have a partial period oftentimes when recording that first pay period. We want to but also time also we may set up the pay time to have the new employee come up at the beginning of a pay period, which can make things easier as well. But we may have a partial period we'll have to deal with for new employees. Are they paid salary or are they hourly? And if they're if they're hourly, we need to know what their hourly rate is. What's their regular time earnings? That's going to be their their hourly rate. What's their overtime earnings? And that'll that'll change. We'll talk a little bit more about on, you know, what are responsibilities for overtime? Which types of employees are responsible for overtime or which type of employees are mandated to have overtime pay? And that's just one of those laws that the company has to maintain the minimum. If they're required to pay overtime, they must pay it. In other words, if they choose to pay overtime, then of course, they can pay more on overtime pay in order to induce, you know, help out and get people to pay or work overtime. So but of course, there's going to be laws and regulations dealing with overtime and overtime pay and then types of deductions and the pay date when the pay date is going to be. Now if we look at the earnings records, you would think any of these types of laws and regulations and taxes related to payroll isn't that complicated in and of itself. This data that we need to collect is not doesn't seem that that complicated. But when we start to put it all together in something like the earnings records, we can see that just the accumulation of it all once we put it all together does start to get a bit more complicated. So we'll spend more time with the calculations later. But here's just an idea of the earnings record that we could we could put in place just to give an idea of the data that we need. And of course, on the earnings record, we've got the name, the address, dress, the city, the telephone number, the social security number, the position, the higher date, the date of birth, exempt or or the exempt or non exempt. And that's going to have to do with whether or not we have to pay them overtime. Paradol under law, we'll talk a bit more about that marital status. And again, you might think, well, why would I don't need to know if they're married or not? That's none of my business as the employer for hiring, it's not a condition of the job or whatever. But when we withhold money for federal income taxes, we need to know that because it's a progressive tax system, and we have to know how much to withhold based on whether they're married or not. So so again, we get in the kind of personal data that may seem not relevant to employment situations, number of exemptions. That's going to that's going to have to do with federal income tax withholdings. We'll discuss that when we get to the to that to withholding taxes, and then the pay rate. So when we start to record this all, it gets more complicated than just the hours times the times the hourly rate. So we'll have the the pay period that we're going to have, then we're going to have the hours worked. So how many hours that worked, what's the regular pay holiday, what's the gross pay, then insurance retirement plan, these are going to be things that we're going to have to take out of the pay in order to calculate certain types of taxes. And then we have the the taxable pay for the Fed. And that's going to be the tax that we will be using in order to calculate federal income taxes. And that could differ, then the tax will pay for FICA. So we might have a different type of taxable wages. And you'll note that on your w two, we'll talk a bit more about this with the calculations. But on your w two, you'll note you've got different wage levels that the box one has wages for federal income tax. And then you've got wages for Medicare and wages for FICA. Well, FICA is Medicare and OASDI, but they could have different, there's three different wages and they all say wages. And that's because they're being used to calculate the tax. And there's different things that can be deducted. So then we've got the federal income tax, we've got the social security tax, we've got Medicare, it's got state income tax, it's going to come out and then total deductions will add those up to finally get to the net pay. So the net pay is going to be the gross amount minus all the taxes. And then we can have a year to date pay. And then the year to date gross pay. And all that you can see that this information is all information on one employee. It's also something that we have to report to the employee. Typically, if you look at your pay stub, it'll typically have all these types. It'll have your gross pay. It'll have everything that was taken out of your gross pay. And it'll typically have the net pay as well as the net pay to date and the gross pay to date. So we need to tell our employee basically every time we run the payroll on the pay stub in some way electronically or by a paper pay stub, all this information. One, you know, how much they earn this time, how much what's their hourly rate, how much did they earn gross? What did we take out for all the deductions? What is their net pay for this particular paycheck? And then what is their net pay for the entire year to date up to this point in time? And what's their gross pay up to this date up to this year and point in time? Very productive payroll paid off.