As a business owner, navigating IRS payroll tax forms can feel like solving a riddle. Forms 940 and 941 are two you’ll want to solve, as each has a specific purpose, though it’s easy to mix them up.
What you’ll learn
What you’ll learn
Updated: April 21, 2025
Key takeaways
- IRS forms 940 and 941 are employer payroll tax forms
- Form 940 focuses on the federal unemployment tax (FUTA)
- Form 941 focuses on the federal income tax withheld for Social Security and Medicare
- Employers typically file Form 940 annually and Form 941 quarterly
This guide compares Form 940 vs. 941 to provide a clear distinction between the two and offer clarification on filing the forms and their specific deadlines.
Key differences between Form 940 and Form 941
Most employers are familiar with the various taxes they must pay, including federal income tax withholding, federal unemployment tax (FUTA), and Social Security and Medicare tax (FICA). Forms 940 and 941 pertain to FUTA and FICA taxes, respectively.
What’s a 940 used for?
Form 940 focuses only on Federal Unemployment Tax Act (FUTA) taxes, which is just unemployment taxes. It reports the amount of unemployment taxes paid during the year to the IRS, and employers may also pay any remaining unemployment taxes along with Form 940 when they file.
As a result, Form 940 is mainly relevant to employers who meet specific wage or employment conditions, including paying at least $1,500 in wages or having an employee for at least 20 weeks. Most employers file the form annually by January 31, but if a business owes more than $500 in FUTA tax in a quarter, it must file according to quarterly tax deadlines.
What’s a 941 used for?
Form 941 focuses on federal income tax withheld from employees’ wages for Social Security and Medicare taxes (also known as FICA, the Federal Insurance Contributions Act). It provides detailed information on an employee’s wages, tips, bonuses, and commissions, plus the employer’s share of the payroll tax. Employers must file this form quarterly on April 30, July 31, October 31, and January 31.
Regarding the key difference between 940 vs. 941, they each pertain to specific types of taxes. Each has its own filing deadlines and reporting focus. Now that you understand this, let’s discuss the importance of each form before moving on to the filing process.
Understanding various payroll forms, including Form 940, Form 941, and other tax forms, can help employers to stay ahead of compliance with tax regulations and avoid penalties. The IRS isn’t very forgiving when it comes to untimely or incorrect filings.
The agency usually imposes fines and penalties that align with the severity of the error. For example, employers may incur a 2 percent to 15 percent penalty on late filings. You can expect to pay interest on unpaid taxes that continue to accrue until resolved. In some cases, the IRS may even seek legal action against a business for unpaid debts.
To avoid fines and penalties on tax returns, it’s important to incorporate several best practices. First, stay informed. You or your team should review IRS guidelines and updates regarding payroll taxes and requirements. It can also benefit your business to use a payroll management system that can help automate tax filings or at least simplify form completion.
“The key to filing Forms 940 and 941 is to be honest with yourself and with the IRS. Mistakes happen, but it’s never wise to intentionally avoid paying taxes – the IRS won’t be happy about it. Include all of the payroll you paid and pay all of your taxes due by the due date on these forms, and you’ll lower your stress and stay in the IRS’s good graces.”
— David Kindness, CPA and OnPay contributor
Now that we better understand the purpose of each of these forms, lets touch on how to make surte they get from point A to point B.
Filing process for Form 940
When discussing Form 940 vs. 941, each filing process might differ slightly. Form 940, the Employer’s Annual Federal Unemployment Tax Return, can initially be a little confusing because even though most employers file annually, some may have to file quarterly — those owing $500 or more in a quarter. Still, the filing deadline is usually January 31 of the following year.
The filing process is straightforward. It starts with gathering any necessary information, including the total wages paid to employees, unemployment taxes paid during the year, and any overpayments from the prior year. The calculation should also include any adjustments, allowances, or credits claimed. Most businesses have a payroll ledger with this information readily available.
Once you have the required information, calculate the FUTA tax liability and fill out the form. Make sure that all information in the form is accurate. You can read the instructions for Form 940 for guidance. After completing the form, make any required payments through the Electronic Federal Tax Payment System (EFTPS) and submit the form by mail or file electronically through the Modernized e-File (MeF) system.
Remember, accuracy matters. Inaccurate information on a tax form can result in fines and other penalties, even when mistakes are accidental. Sometimes, inaccurate information can lead to an audit or assessment of your company’s payroll and finances. That said, accidents do happen. If you discover an error after filing, file Form 940 again with the corrected information and check the amended return box in the upper right corner.
Keep in mind
Many of the companies that provide software for small business payroll will automatically file form 940 and 941 so you have one less item on your to-do list.
Filing process for Form 941
Form 941, the Employer’s Quarterly Federal Tax Return, is the document used to report income and payroll taxes withheld from employees’ wages, including FICA. To complete the return, you’ll need access to the following information:
- Wages paid to employees
- Employee tips
- Federal income tax withholdings
- Employer and employee shares of Social Security and Medicare taxes
- Additional Medicare tax withholdings
- Quarterly adjustments for sick pay or tips, if applicable
Once you gather the necessary information, determine your filing method: e-filing or mailing. E-filing is the easiest method, and most tax preparation services can streamline the process. That said, you can also e-file using the Modernized E-File (MeF) system just like Form 940. If you choose to mail the return, it’s important to understand that address varies based on your state and whether you’re including a payment with it, so check the form’s instructions to be sure you’re mailing it to the right place.
After choosing a filing method, complete the form. Follow the instructions for Form 941 provided by the IRS. As with Form 940, ensure all information provided on the form is accurate, or you could risk penalties and fines. If you need to make an amendment after submitting the form, file Form 941-X. As with Form 940, you can submit payment for Form 941 through the EFTPS.
Form 941 vs. 940: Know the difference to stay ahead of avoidable fines
For businesses looking to stay compliant, understanding the difference between Forms 940 and 941 should be on the to-do list. Though the forms are similar, they serve distinct tax purposes – Form 941 tracks quarterly employee withholdings, while Form 940 handles annual FUTA tax obligations. Both ensure that tax dollars flow to the right government programs and that both employer and employee obligations are taken care of. Taking the time to understand each form now will save your business headaches (and potential fines!) down the road.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.