Form 941: Employer’s Quarterly Federal Tax Return Overview

What Is IRS Form 941: Employer’s Quarterly Federal Tax Return?

IRS Form 941, also known as the Employer’s Quarterly Federal Tax Return, is used when businesses report the income taxes, payroll taxes, Social Security, and Medicare taxes withheld from their employees’ wages.

Many businesses are required to file IRS Form 941 on a quarterly basis, and the form ultimately determines the company’s total payroll tax liability for the quarter.

Key Takeaways

• Employers transfer withheld taxes to the IRS monthly or semiweekly, reporting quarterly on Form 941 the details on staff, compensation, and taxes owed or overpaid.
• Form 941 has five parts, covering employer information, staff details, tax deposit schedules, business status, and signatures. Payments for owed taxes can accompany the form using Form 941-V.
• Part One of Form 941 reports federal taxes withheld, Social Security, Medicare, and additional Medicare taxes. Small employers with $1,000 or less owed for the year may file Form 944 with IRS permission.
• Amended Form 941-X is used to correct errors made on a filed Form 941.
• Employers owe employment taxes and should refer to IRS Publications 15 and 15-B for guidance on taxable payments and tax calculations.

How To File Form 941

Form 941 consists of six pages and five parts. At the top of page 1, the employer provides a name (including a trade name if one is used), address, and employer identification number (EIN). Also, the employer indicates the filing period:

• First quarter (January, February, March)
• Second quarter (April, May, June)
• Third quarter (July, August, September)
• Fourth quarter (October, November, December)

The deadlines for filing Form 941 are strict, and fall on the last day of the month following the end of a quarter (April 30, July 31, October 31, and January 31).

You can file the form by mail or online using the Modernized e-File (MeF) system available on the IRS website.

Warning

Not filing IRS Form 941 by the due date or reporting less tax liability than what you actually owe can lead to stiff IRS penalties. The IRS charges a penalty of 5% of the total tax amount due, and you can be charged an additional 5% fee every month your return has not been submitted, for up to five months.

Part One

In Part One, the employer reports the number of staff employed, their compensation, and the taxes owed. This part also indicates whether the employer owes taxes (balance due) or has overpaid employment taxes. Any overpayment can be applied toward the next quarter or received as a refund. The choice is indicated by checking the appropriate box on Line 15.

Part Two

Part Two, which begins midway on the second page, explains the tax deposit schedule for employment taxes. The deposit schedule for most employers is either monthly or semiweekly. If depositing monthly, a breakdown of tax liability by month is entered here.

Employers depositing taxes semiweekly explain their tax liability for their deposits on Schedule B. There is a next-day deposit requirement for taxes exceeding $100,000. Taxes of less than $2,500 can be paid with the form and need not be deposited.

Part Three

In Part Three, the employer must answer two questions: Did the business close or stop paying wages (and the date this happened), and is the business a seasonal employer (and thus a return every quarter is not required)?

Parts Four and Five

Part Four

In Part Four, the employer is asked whether they will authorize an employee, paid tax preparer, or another third party such as a Certified Public Accountant (CPA) to speak with the IRS regarding the return. If the answer is yes, the employer must provide the designee’s name, phone number, and a self-selected five-digit personal identification number so the IRS can confirm the person’s identity.

Part Five

In Part Five, the employer signs, dates and provides a daytime phone number.

In addition, if the employer used a paid preparer to complete the form, the preparer must enter their information in Part Five. This includes name, Preparer Tax Identification Number (PTIN), firm name, EIN of the preparer or the firm, address, and phone number.

Should the employer owe employment taxes for the quarter, payment can accompany the filing of Form 941. Use Form 941-V: Payment Voucher to ensure that the IRS processes the payment correctly.

Form 941 is available on the IRS website.

Taxes Reported on Form 941

In Part One, the employer reports the amount of taxes paid on wages, tips, and other compensation. There are four types of taxes:

1. Federal taxes withheld from employee wages (Line 3).
2. Social Security taxes (Lines 5a and 5b). The tax rate of 12.4% is for amounts owed by the employee and employer.
3. Medicare taxes (Line 5c). The rate is 2.9 percent, and covers both employer and employee taxes owed.
4. Additional Medicare taxes on compensation over $200,000 (Line 5d). The tax rate is 0.9%; the tax is paid solely by the employee.

Important

Not all types of businesses need to file Form 941, including some seasonal businesses, companies that employ farmworkers, and individuals employing household staff, such as maids (but they may need to file Form 1040 instead).

Special Considerations When Filing Form 941

For Small Employers

An employer that owes employment taxes of $1,000 or less for the year can file Form 944, Employer’s Annual Federal Tax Return if given IRS permission to do so. Call 800-829-4933 or send a written request, as you must receive permission before filing this form instead of Form 941.

Amended Forms

If you need to correct Form 941, use Form 941-X, Adjusted Employer Quarterly Tax Return or Claim for Refund. For example, if wages were understated or Social Security tax on tips was overstated, and you discover the error, use this form to correct it.

Who Is Required To Fill Out Form 941?

As an employer, if wages that you pay are subject to federal income tax withholding, Social Security, and Medicare taxes, you’re required to file Form 941 every quarter.

What Happens If I Don’t File Form 941?

If your business is obligated to fill out Form 941 and fails to do so, you could face stiff penalties, including a penalty of 5% of the total tax amount due, an additional 5% for each month the return remains unsubmitted to the IRS (for up to five months), and an initial penalty of 0.5% of the unpaid tax amount.

How Do I Fill Out a Form 941 if No Wages Were Paid?

If, for instance, you’re a seasonal employer and don’t pay wages all year long, check the box on line 18 of Form 941 to let the IRS know that you won’t send the form every quarter. Be sure to continue to check it every time you do file or the IRS will expect the form every quarter.

The Bottom Line

IRS Form 941 is an important document for businesses. It is used to report income taxes, payroll taxes, Social Security, and Medicare taxes withheld from employee wages. The form requires you to disclose specific information about your company, including the number of employees, total wages paid, and taxes withheld.

Filing deadlines for Form 941 are strict, falling on the last day of the month following a quarter’s end. Failure to file or underreporting can result in significant penalties. Given the complexity of this form and the risks involved, it’s smart to consult with a tax advisor or business attorney for more detailed guidance.

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