 In this presentation, we will take a look at the Form W2 and Form W3. So of all the payroll tax forms, the Form W2 is probably the one that we are most familiar with, one that we have received from our employer, one that we have used in order to fill out our Form 1040, our income taxes, at the end of the year. What we'll do here is go over some of the components of the W2, we'll discuss how it relates to the other payroll tax forms, and part of its functions basically beyond just recording the taxes for our 1040. So first we'll take a look at that function here, of course, we receive it in order to help us to create and report our income on the Form 1040, our responsibility to do just by being the citizen. So we're going to self-report how much we've earned and that's going to be on the 1040. Now that's going to be one purpose, but the W2 should also basically be a firm statement to us as well that, hey, the government is giving us the W2, I mean the company is giving us the W2 and has also given the W2 a copy of the W2 to the IRS. So W2 is also saying, hey, this information that we're giving to you has been provided directly to the IRS as well. And therefore, if you don't report this information, you're almost certainly going to get some type of letter, like an audit of some kind, some letter saying, hey, there's W2 income that you didn't report because it's being reported to the IRS. So that's one thing to just be aware of. This is going to be a red form of the W2 basically indicating that one copy is going to go to the employee, one copy is going to go to the IRS and therefore the information is known on both sides and therefore it's something that's basically you just have to report on your 1040 and it's already known by the IRS. If we go through the components of the W2, we of course have line one, that's going to be our wages and tips and you would think that would be, if you were to ask someone how much they earn, you would think you can look at the W2 and just look at the line one and say that's how much we earn. But it's not an accurate number in all cases because really line one lines up to what we earn for calculating federal income taxes typically, meaning it lines up to kind of like the withholding calculation we're making for federal income taxes and the amount we're going to calculate to use how much we owe taxes on the 1040. But it's been reduced by some things like for example it's been reduced by the amount that we put into our 401K plan. So it's not really what we've earned possibly in that case. The Social Security is another wages but it's geared towards the wages for Social Security calculations and remember that may not be accurate in terms of how much someone earned as well because there's a cap on how much Social Security wages are reported, we don't pay taxes over that cap. So if someone made over a certain amount of money then the Social Security wages wouldn't actually be accurate in how much they earned because it would be capped at that amount. The Medicare may actually be the most accurate wage calculation if you look on the form W2, if you want to know how much someone actually earned the Medicare may be in many cases the highest number because there's no cap on Medicare and there's no deductions like there are for line one such as the 401K type deduction which is going to be a non-taxable for federal income taxes but Medicare we pay the rate, there's no cap on it. So we have these three wage calculations. We use the first one in order to calculate the taxes on the 1040 but the other two will help us to calculate the taxes for Social Security and Medicare and make sure that those are in alignment as well. Line two has to do with the federal income taxes. We report that on the second page of the 1040 and that ties into what we've done in like the 941s where we reported the federal income tax on the 941s from the company side. So from an individual side this is the individual's portion of what we reported on the form 941 as what we withheld from employees and gave to the government. So then we have the Social Security tax withheld and these two should line up so we should be able to basically see line three and line four line up. This again reporting and reflected in the numbers reported on the forms 941 as is the Medicare. So here's the wages, here's the Medicare taxes. We should basically be able to take our rate here and just the employee rate. We should be able to take our Social Security wages reported here times whatever the rate is just for the employee portion not for the both of them as we see on the 941 just the employee half of it which is currently 6.2% and that should give us our Social Security amount. Medicare, we should be able to take our Medicare wages whatever is here times the employee half which is currently 1.45% and we should get the Medicare tax here. So those are going to be the main components of the W-2 we're going to use to report. Now some of these may or may not tie out to like if we added up the 1040s if we added up the wages on the forms 941s depending on a couple things that could differ like tips you know we should be able to reconcile at least the total wages from the 941s to all of the W-2s on the wages if we were to add them up we should be able to reconcile them in some way. Same with the Social Security and the Medicare if we were to add up the Social Security and Medicare wages then for all W-2s which we'll do in a second on the W-3 then it should basically we should be able to reconcile that to the 4 quarters on the 941s same as the case for the Social Security tax withheld and the Medicare we would add them up for all employees we should be able to reconcile those to the 941s. So then we have tips we won't go over the tips the vacation we of course have the employees first name and initial last name then we have whether or not they are in a retirement plan are they component or a participant within a retirement plan if they are we typically will report over here how much was withheld for the retirement plan and that'll be one of the major reconciling items why line one will differ from line three and line five could be that they put into a 401k plan and and that will be reflected typically down here in box 12 and then we've got the state ID number and if there's any basically any state withholding so we got state wages and state income tax if there is a state income tax depending on where they are located. So then we have the W-3 and the W-3 you can see is very similar to the W-2 we got line one wages line one wages line three social security line three social security wages line five Medicare why because the W-3 is is in essence going to add up all the employees W-2 so it's kind of like the summary. So if we added up all the employees W-2's we basically have a W-3 which represents if all employees were one employee kind of the numbers for all the employees put together and this is one this is the form then that we should be able to take and reconcile to some of our other payroll forms and if we can do that then we can have a little bit more assurance. So our 941s we should be able to reconcile the differences between the 941s and for the wages for the federal income tax for the wages for the social security and the wages for the Medicare as well as the federal income tax withheld the social security tax withheld in the Medicare tax withheld. Now there can be some components that will complicate that so TIPS is a component they can complicate that calculation as well but we can see how these forms are all going to be related in some way and note that when we report the amounts on the W-2 and when we create the 1040 then whether or not we get a refund will depend on the withholdings that we're reporting that have been made by the company by the business throughout the year. So when an employee then if we over withheld on the employee for the federal income taxes then they'll get a return once they do their reporting. So that basically the form 1040 is the year-end reporting that's supposed to verify kind of like the 941s at the end of the quarter of the 940s for the corporation. The individual is reporting the verification that they've made their payments they're double checking the liability reporting that they've made their payments through the corporation withholding the money from them and then hopefully getting a refund again it's never exact for the 1040 for the federal income tax it's impossible it's too complicated but hopefully it's a little bit over and then you get money back. The Social Security and Medicare can be checked on when we report our taxes we note that we put that into our tax calculations as well on the 1040s we probably don't notice them as much because those will be exact typically when we get a refund we get a refund typically for over withholding for the federal income tax the Social Security and Medicare should come out exactly it shouldn't we shouldn't have any over withholding on those components.