 In this presentation, we will take a look at Form 941 Employers Quarterly Federal Tax Return. Here's a copy of Form 941. This is the 2018 form. You can find this on the IRS website at irs.gov. These are going to be the components of the form. We're going to focus here on the calculation of the form. We note that up top we're going to have the EIN number, the name, and then the address. Then we want to know which quarter we are talking about. So remember that when we think about the quarters, of course, three months in a quarter, there's 12 months in the year divided by four, three months per quarter, we will indicate what quarter we are talking about here. Remember that this is a quarterly form, which is different from the yearly form. And there is a yearly payroll tax form called 940. And we don't want to get those two mixed up. They can seem similar, but they're going to be different. The 941 is really the main form. And it's going to be calculating the FIT, Federal Income Tax for the employees, the Social Security, both employer and employee, and Medicare, both employer and employee. Because these are larger amounts, or this is my guess as to why we need a quarterly form rather than a yearly form, because they're larger amounts and important, then we have to have an added level of reporting, meaning, for example, if we take a look at our 1040s for our individual tax returns that we report at the end of the year for our individual reporting, we do that on a yearly basis. For the 941s for the FIT, for the payroll taxes, the Social Security and Medicare, we have to do that on a quarterly basis. So that's what we're doing here. The 940, then, similar form to what we're working with here, but will be for FUTA, which is a much smaller tax. So it's actually still a federal tax, but it'll be a much smaller one. When filling out this form, we can pick up this information. This is part one of the form. Line one says, number of employees who received wages, tips, or other compensation. So whatever the number of employees are, in our case, we had four employees at this quarter. Then we're going to note the days. So this is the actual day within the quarter that we can pick up the number of employees. And then we have the wages, tips, and other compensation. This, though, we got to be careful on because when we look at the wages, total wages then, in our case, this is coming from our registered numbers up here, was 96, 973. But this wages here is really trying to pick up the FIT wages. Note that line under it has to do with federal income tax. So really, this line, too, we want the FIT wages, which can be reduced by things such as an insurance or a retirement plan. So this number is 91, 425, 10, in this case, calculated as the total earnings, 96, 973.5 minus those items that could be reduced. And you can think of when you fill out your form 1040 or what will reduce the AGI. The 401k is not something that will be taxable as wages for adjusted gross income, as well as if we're participating in a group insurance type plan. Now, in this case, if this was a cafeteria plan, we would be reducing it. But in this case, we're saying that this is not a cafeteria plan, and therefore will not be reduced from the total earnings to get to the FIT earnings. So we're just going to subtract, for this example, the 5548.4, given us that 91, 425. So we just want to be careful and keep in mind that the FIT wages could differ from the wages for the total wages. So here's total wages, FIT wages are going to differ. Then we're going to calculate the federal income tax withheld. And here, we have to just pull this basically from our table, what we withheld from. So this is what we withheld in accordance with our register. That's the number we're going to use. It would be nice if these two numbers were related in some way, meaning it would be nice if we could derive this number by some calculation from this number. But we can't do that because the FIT is too complicated. So although this number is kind of used, when we break it down to an employee by employee basis, the rates will differ because each employee has a different number of allowances and a different number of possibly a 401k plan or retirement plan, which could change those calculations as well as be as in different tax brackets. So because we have a progressive system and a fairly complex system in terms of the federal income tax, all we can do is say, hey, this is the total wages that were we withheld on in total for all of our employees. And this is what we actually withheld. There's no way the IRS can say, let me look at that number and derive this number. But we'll give both of that data to the IRS. Then we've got the Social Security wages and the Medicare wages. These are going to be a bit more straightforward. We'll pull this from our table as well. The Social Security wages, the 96973, that matches this 9697350 up here. Note that this too could change or be different from total wages if, for example, there was a cafeteria plan. In this case, there's not. So they're the same. Or if somebody had hit the cap of 128,400, in which case it would be lower by the amount because of somebody hitting the cap. So then we're going to take this 9697350 times 0.124. So if we do that calculation, 96973.5 times 0.124, we get 12,02471. So that's going to be the 12,02471. Now you might not recognize this rate. And that's because it's twice the 6.2. So when we take the 6.2 percent times 2, that gives us the 12.4 percent or the 0.124 we're using here. So note that this is including the employer and employee portion. In other words, if we're taking this total that was taken out of the paycheck for FIT 6012.36 social security FIT times 2, that's going to give us the 12,02471. Notice how nice and easy that works. And that's because it's a flat tax. So in this case, we are able to take the aggregate amount here and multiply it times a flat rate. And that should be equal to adding up all the information that we took out of each individual check at the same rate. So then we're going to do the same thing for the Medicare. So here's the Medicare. Now again, this number could change be different Medicare wages from the total earnings if there was something like a cafeteria plan. In this case, there's not, but it won't be different due to there being a cap. In other words, there is no cap on the earnings for Medicare. So that's something we don't have to worry about. So it will usually be higher than or if someone hit the cap for social security, the Medicare wages will be higher. In our case, it's the same amount. So we're going to take once again that 96973.5 times 0.029, giving us 2008-12-23. So that's going to be this 2008-12-23. Again, we might not recognize that number that 0.029. And that's because it's the employer and employee portion, or in other words, it's 0.0145 times 2. So there's the 0.029. And this amount, this 2011-12, can tie into our worksheet by taking the HI1406.12 times 2 gives us the 2008-12-23-24 rounding difference here. Then if we add those two up, in this line, 5e says add column 2 from lines 5a, 5b, 5c, and 5d. So what we are doing here is we're going to be these two numbers. I tried to get the calculator there and did something crazy. So we're going to go 12.024.71 plus 2812.23. That gives us the 1483694. That's the total FICA taxes then. So if we add that number, plus the federal FIT, federal income tax, which is 17003.26, the 31840-20 is going to be the total taxes that we're going to owe for FIT, Social Security, Medicare. Now we already paid them. I shouldn't say what we owe. That's going to be the liability related to this quarter. Then if we go to the second part or down a couple lines here, we're still on 5e. This is the total FICA, Social Security, Medicare. And then we have, in line 6, total taxes before adjustments. And that's our 31840-20 that we just added up, adding up line 3, 5e, and 5f. Then if there's any adjustments down here, like if we're off by pennies because of rounding, they allow us to adjust for that, which is nice. So we don't have to write a check for like a penny. We can just say our adjustments off by a penny or a few pennies, less than a dollar, hopefully. And then we're okay. We're not going to deal with eight or nine for current quarters adjusted for sick pay, current quarters adjustment for tips. So we're going to remain in line 10, total taxes after adjustments, 31840. Then we're not going to have any qualified small business. So in our example, we just have line 12, total taxes after adjustments and credits, still 31840 and 20 cents. Now we got to pick up our deposit side. Line 13 says total deposits for this quarter, including overpayment applied from the prior quarter. This is typically the most confusing part of calculating this form because note that this number here should be the same as this number, but this number up top, it represents the liability. So we've recalculated the liability. If we were to interpret what we're saying to the IRS, we'd be saying, hey, this is our recalculation of FIT, Social Security, and Medicare liability for this quarter. This then should be a calculation of what we have paid, meaning it should have already been paid similar to our 1040 that we do on the end of the year for individual taxes. In other words, we create the 1040, we come up with a number that says, hey, this is the liability that we owe for the year ended. And then we say, hey, withheld from our wages, meaning what we've already paid is this amount. Typically then we have a refund for most people if they're W2 employees. And that's because we paid a little bit more. That's how the system's designed. It's impossible, almost pretty much impossible for all practical purposes for most people to have the 1040 withholdings match exactly what will be withheld. So it's designed to have a little bit over and then get a refund. Here, however, because it's more of a flat tax, we can know exactly what will be paid. And this is just an information return. Then we're just saying, hey, this is what we owed. This is what we already paid. In order to get the supporting information for the amounts that already were paid, we can go back to the check register, we can go back to the GL and see the checks that were paid. In our case, we're going to go back to the journal entries. So we had this check was paid going on to the checking account, this check was paid. And these two dates are on 915 and 1015, which you might say, hmm, this one happened in the third quarter. And this happened in the fourth quarter. Note what happened here, though, is that these two payments are still both applied to the third quarter. And that's something that can be confusing with payroll. Obviously, we made the payment here in October, October, November, December, being part of the fourth quarter. But we should have applied it to the liability incurred when the payroll period ended in the third quarter. So we're going to add these up. Now, when we look at this information, we did it all with one journal entry for all of the tax liabilities, which includes what we need, then, of the OASDI, the H.I., Social Security and Medicare, but does not include the FUTA and SUTA. Those are going to have to be paid when we do the 940 calculation or accounted for when we do the 940 form, not the 941. And we need the FIT. So in other words, we're looking for these amounts for these two payments. If we add these up, these are the amounts that we have already paid. They've already come out of our checking account. So if we take out the calculator and see if we can add these up properly, we've got the 6063.1 plus the 14417.98 plus the 8599.13 plus the 5961.61 plus the 1394.25 and the 8404.13, giving us the 31840 and 20 cents. So if we go back to our form, then 31840 and 20 cents matches the liability. So just note that this one here is the liability, which we're getting mainly from our register up here, our payroll information to calculate the liability. This down here should match because we've already made the payment, but we need to support this information by going back to the journal entry or the register in order to see what has been paid. End simulation! End the simulation!