 In this presentation, we will take a look at net pay calculation. When considering the net pay calculation, we can think of it in its most simple form. When we're going to go from the gross pay to the net pay, note that the gross pay represents what would have been earned if there were no deductions from the wages, meaning if whatever the employee earned, we would just then pay that. That would be the paycheck if there were no other deductions, including things like taxes and any other types of deductions. Now, I say theoretically sometimes when I say it would be the gross pay if there were no other taxes. Because again, from an economic standpoint, if we were to negotiate what the gross pay would be and there were no taxes, no payroll taxes, and other types of deductions, then the gross pay could differ. So there's some argument as to who the actual payroll tax liabilities and tax liabilities are falling on, because it's pretty clear that of course, the gross pay may not be the same. The negotiation wouldn't come out the same if there wasn't taxes. But in theory, the gross pay is what is actually being earned. So when we say this is how much money we earned on a yearly basis, we say someone earns $100,000. That's typically their gross pay. So from a most simplified standpoint, then we're just going to subtract out the deductions that will be included, and that'll get us to the net pay. So whenever we see our paycheck, what we have to get, the check we receive will be the net pay. And if we look at the pay stub, we can go through the calculations and see what is included in the deductions to get from the gross pay minus the deductions to the net pay. So then of course, the types of deductions, which we've taken a look at are going to be those mandatory deductions, including taxes, federal taxes, state taxes, so the federal income tax, the state income tax, the social security and the Medicare, and then the voluntary types of deductions. And those are going to be the benefits not typically given or not possibly not mandated by law, but oftentimes benefits given to the employees as an option. So a bit longer calculation would look something like this, we'd have the computation, we start with the gross pay, that would be the earnings before any deductions, then we're going to subtract out the pre tax deductions. So these are going to be deductions that we're going to need to reduce in order oftentimes to get the taxable earnings. And this could be a little bit more complex than just doing this as a one time calculation or one formula like this, but this will be used to give us the idea. The reason we say that the reason I say that is because the taxable earnings would work if we're talking about one type of tax, meaning the federal income tax has different taxable earnings possibly than the social security tax or the Medicare tax. So when you see this type of calculation, usually we're kind of you can kind of think of it as the federal income tax calculation, which is mainly the most complicated tax usually that we'll need to come up with. So gross pay minus the pre tax deductions. And the reason for that is that the social security and Medicare usually more of a flat tax. So usually we can just take kind of the gross pay to calculate things like social security and Medicare on a flat tax basis. We're taking these deductions out in order to get the taxable earnings usually to calculate things like the federal income tax. And then we're going to subtract out those taxes, those taxes that we calculated based on the taxable earnings. So that's the reason we have this ordering. And then we've got the other types of deductions, everything else we need to take out. So the other deductions down here don't have any effect on the taxable earnings. That's why we're going to take them out after we calculate the taxes. And when we look at the register, when we actually do these calculations, we will, this will become more apparent. We'll see how we'll set up the register in a logical fashion in order to take the gross pay, take the deductions from the gross pay, get our taxable earnings, calculate the taxes based on those taxable earnings and then deduct the taxes. And then we can take everything else out before we arrive finally at the net pay, the actual amount that will be paid. Note this deduction can be seen in terms of every paycheck from paycheck to paycheck, pay period to pay period, whether it be weekly, monthly, biweekly, semi-monthly, or it can be seen on a year to date type calculation as well. Similar type of worksheet can be seen. And this is the type of thing that you may see on a pay stub or you should see something similar to this on a pay stub both from a pay period standpoint, what's your gross pay, what's your deductions, what's your next, what's your net pay, and in terms of a year to date calculation, information needed to be given from the employer to the employee. And once again note that this doesn't seem too bad, and it's not too bad from pay period to pay period, but when we have to do it also as a cumulative year to date with each pay period, with each pay stub, it does get to be something that we really need to keep detail track of.