It's almost that time of year; tax season is nearly here. But with all the forms and applications you need to fill out, it's easy to get confused.

No matter if it's your first time or you've been filing for years, it's important to keep track of how much you've made throughout the tax year. This will make it a little less complicated when you're calculating how much you owe to Internal Revenue Service (and vice versa).

Here's what you should know about net pay, what it is, how to calculate it and the difference between gross pay and net pay.

What is net pay?

Net pay is the amount of money employees earn after payroll deductions are taken from gross pay. These includes taxes, benefits, wage garnishments and other deductions. 

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In simple terms, net pay is the money you take home directly from your paycheck. 

For example, if someone gets paid $1,200 per week but $160 is taken away by deductions, that person's net pay is $1,040 per week.

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What is gross pay?

Gross pay is an employee's total earned wages before payroll deductions. 

What is net income?

Net income, also known as net earnings, is the total revenue of a company minus operating costs. This includes the cost of goods, taxes, interest, operating expenses, selling, general and administrative expenses and depreciation. 

Net income is used as a measure of profitability.

For employees, what you need to know about net pay

Net pay is what you take home. But even if you have the same salary as someone, that doesn't mean you will have the same net pay. Net pay is affected by certain taxes, benefits, wage garnishments and other deductions.

Someone's net pay can be different than yours based on their marital status, filing status, tax credits, children and dependents, among other factors. 

For employers, what you need to know about net pay

As for employers, there are certain factors to consider when it comes to your employees' net pay. For example, retirement plan contributions, benefits and employer FICA taxes are not included in someone's net pay and are deducted before an employee receives it.

Net pay also does not refer to the amount it costs to employ; rather it is the amount an employee takes home. 

Keeping track of your employee's net pay and gross pay is important for tracking payroll taxes. If there are any inconsistencies between the two, you may want to verify the information. If there are any issues, this could result in penalties.