 In this discussion we will discuss the discussion question of describe annual payroll tax reporting. So here we're going to go into the payroll tax reporting for the annual reporting and the form that we will use for the annual payroll tax reporting will be Form 940. So it's important to keep that as probably where we want to start. That's going to be that 940 is typically the annual payroll tax reporting. We could also list the other types of reports that would be reported at the end of the year, which of course would be the W3 and the W2s. That's to keep separate. We want to keep that opposed from the 941. So it's easy to get those mixed up. The 941s are reported quarterly and then the form 940 is going to be the annual form. We can also take again of the W2s and the W3s as annual forms. But those are the confusing ones that we can easily get mixed up because you'd kind of think that the 940 being that the number is prior to the 941s would be done before the 941s. Or at least that's how I would I think sometimes. So but that's not the case. We do the 941s first and then we do the 940 at the end of the year. So the 940 then is different from the 941s. The 941s are the main big guys. Those are taken care of the big taxes, those being federal income tax, social security, both employer and employee portion and Medicare, both employer and employee portion. Whereas the annual report, the 940 only takes care of the FUTA tax. And really what that means is the IRS I think it's kind of taking pity on us. They're saying you only have to report this tax because it's smaller on an annual basis one time a year rather than on a quarterly basis four times a year, which is nice. But they're not so they're not the same thing. They're not really related to the 940, the 941 and the 940 to totally different types of taxes that are being calculated there. The calculation for the 940 is going to be giving us the total earnings and that's usually basically total total earnings not being reduced by things like a 401k plan where you typically put the total earnings on the on the FUTA. And then we're going to subtract from that and this kind of a funny calculation the earnings that are above the $7000 limit the cap limit which will give us the amount of earnings that are FUTA earnings earnings that are up to the cap of $7000. Now this is a funny calculation because you know the $7000 as a cap is pretty low meaning we are going to we're going to include in FUTA calculation wages for every employee up until they hit $7000. So and then we're not going to include any wages in our calculation after they get above $7000 after they get above the cap. A thing that's funny about that is pretty much every employee will hit $7000. So FUTA when looking at it when calculating it when trying to find where the wages come from will typically all come or mostly come mainly come from the first like quarter or the first few months and then FUTA will go consistently down because um a bunch of the employees will hit the cap. So in essence then almost all the employees will typically hit FUTA at some point throughout the year. So when we report at the end the FUTA earnings will often be like the number of employees we have times $7000 times the cap. The only reason they would not be is if or or a few reasons they may not be there may be more but the few reasons they would not be the common reasons would be that if if an employee was only employed for a few months and and they never they didn't get the $7000 before they were terminated or if they were employed towards the end of the year like in this December or something and they didn't get to the to the $7000 there or or something like that. So another so that's going to be a lot lower number in other words the FUTA taxable income FUTA taxable income will be much lower than any other taxable income much lower than gross income total income social security income or Medicare income or or so it's going to be a much lower one so then we'll take that and we'll multiply times the rate which is 0.006 or 0.6% currently now that's going to be a practical rate right now because it but it's based on whether or not state payments have been made so FUTA will be tied to in some ways SUTA state unemployment tax and that's unusual because usually we let the states kind of do what they want for their own taxation and they're they're sovereign in some way but the FUTA law somehow kind of tied they basically tied SUTA taxes to it by saying well if the state puts in a SUTA tax then we will charge less you'll get basically a deduction you can have a less of a FUTA tax which basically mandates kind of mandates the states to implement some type of SUTA tax so pretty much every state has a SUTA tax in some form so even though we concentrate on FUTA we need to think about SUTA when considering federal taxes because there's this exemption so when you see the rate for FUTA for practical purposes it's currently like a really low rate like 0.6% but you'll often see a higher rate based on the idea that it's a high rate unless you pay SUTA which almost every state has and therefore you pay the lower rate so that's basically how it works then there's going to be some types that's basically the calculation for the liability now if you if for whatever reason SUTA was not paid then you may have they may have to pay more FUTA so there'll be that in the in the annual form as well and then this is an information form again so we should have already paid FUTA so whatever the liability is should also match what we have paid to to the the government already so this should be an information return similar to our kind of our 1040 return where we at the end of the year we report our our earnings we calculate the liability and then hopefully we've already paid it and then hopefully we paid a little too much and we're going to get a return back in this case we're not going to pay a little too much we should have paid exactly what it should be because it's a flat tax easy to calculate easy for us to report easy for us to withhold or we don't withhold here easy for us to pay so it should be exact and then the second page of the 1040 will tip or the 940 will typically have a breakout of when the FUTA liabilities happened what what quarter they happened in and typically they will be mainly if we had a full year's worth of of earnings in the first quarter then we have the the forms w2 and w3 so of course we're most familiar with the form w2 the end reporting of the year on the w2 which includes our federal income tax wages our federal income tax withholdings our social security tax wages our social security tax withholdings our Medicare tax wages our Medicare tax withholdings so in terms of the wages between federal income tax wages social security wages Medicare wages those are all based on our gross earnings but could differ and often will differ because the FIT wages in box one federal income tax what we actually use to fill out our form 1040 for the for federal income taxes of it is um is usually lower by a few things including 401k plan so that's going to be decreased by the 401k plan which can be significant and possibly a cafeteria plan so box one so you know there is not oftentimes not the most accurate number when seeing how much someone actually earns box two is the withholdings box three is for for federal income tax and box three i believe is going to be the social security wages and those are going to be could be lower than you would think for total earnings especially if you have a high income individual someone who earns over 100 and some thousand because they may hit the cap and if they hit the cap then it'll just stop at the cap and that's the only earnings that will be reported it also may differ than two actual earnings if there's a cafeteria plan or something that would lower the earnings then that will be next to that you'll have the social security withholdings the amount taken from the social security taken from the paychecks for social security only the employee portion however not the employer portion then you'll have the medicare wages under that which will be probably the highest wages on the w2 form and they will they could be less still than total compensation total earnings by something like a cafeteria plan and then you'll have the medicare withholdings on the w2s finally you'll have the w3 which in essence is just a summary of the data on the w2 so if you were to clump clump all your employees together into an employee ball or a big employee person then the wages for all of them would be what the w3 would in essence represent meaning box one f it wages would be the sum of box one f it wages for all employees box two f it withholdings would be the sum of all f it f it federal income tax withholdings for all employees and so on and so forth so those are going to be the major reports that we have at the end of the year the 940 the the w2 and the w3s obviously the the 941 would be done quarterly and we'd have to do the last quarter in the end of the year and that's going to be reporting the federal that's going to be reporting federal income tax withholdings that's going to be reporting the social security and medicare for both the employee portion and employee portion and then note we can tie out some data from the four quarters on the 940 to the form w3 in particular off the peril you