If you’re an employer that withholds more than $1,000 in Social Security, Medicare, and federal income taxes from your employees’ wages, you’ll need to fill out and submit Form 941, the Employer’s Quarterly Federal Tax Return. This form breaks down how much you’ve withheld from your staffers’ paychecks, as well as how much you’re sending in for the employer portion of Social Security and Medicare taxes. While it’s pretty straightforward overall, there are a lot of lines and boxes to fill in.
Here’s a quick guide to how 941s work and some instructions for completing yours.
What is Form 941?
A 941 return is used to report payroll tax withholdings such as federal income tax plus Social Security and Medicare (typically called FICA) that are withheld from employees’ paychecks. Your Form 941 filing also reports your business’s quarterly contribution to Social Security and Medicare taxes. Keep in mind that 941 reporting is often completed separately from your FICA payments.
When should a 941 be filed?
The deadline for filing your 941 is at the end of the quarter on the last day of the month: April 30, July 31, October 31, and January 31. As a business owner, once you file your first 941 once, you must file the form quarterly, even if you have no taxes to report. If your business closes, you also have to file a final return for the year the business closed.
Based on how much you’ve withheld for taxes, your company will be a monthly or semi-weekly depositor, and all payments must be made through the Electronic Federal Tax Payment System. If your taxes due are less than $2,500, you can pay them with the return, but if your tax liability for the quarter is more than $2,500, you will be asked to make a monthly deposit.
How do I know if I need to file a 941?
Depending on how much tax you pay, you may need to file either a 941 or Form 944. For example, if you expect to have tax liability less than $1,000 annually, you may be able to file a 944. If you are a new business owner, you’ll be advised on what form to file when you receive your Employer Identification Number (EIN). If you want to dive a little deeper, we’ve also got detailed instructions for how Form 944 works as well as instructions to complete a 944.
What do you need to fill out Form 941?
To complete Form 941, you’ll need to have a handle on the following:
- Form 941 – Downloadable PDF
- The number of employees that received wages, tips, or other compensation in the current quarter
- The amount of wages that have been paid for the quarter
- Any tips reported by employees
- Federal income tax withheld from an employee’s wages
- The employee’s portion of Social Security and Medicare taxes withheld from the employee’s wages
- The amount of Social Security tax or Medicare tax paid by the business
- Any additional Medicare taxes withheld from an employee’s wages
- Current quarter’s adjustments to Social Security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance
- Your EIN and other basic business information
Instructions for filling out Form 941
Read on for a line-by-line explanation of all the details and calculations that are included in Form 941.
There are currently four parts that need to be completed on Form 941:
Form 944, Part 1 – Line:
- Number of Employees Who Received Wages, Tips, or Other Compensation This Quarter: All employees on your payroll for the specified period need to be included, though employees currently in a non-pay status should not be included.
- Wages, Tips, and Other Compensation: Total amount of wages, tips, and compensation paid to all of your employees for that year.
- Federal Income Tax Withheld from Wages, Tips, and Other Compensation: Enter the total of all federal income tax withheld from employee wages for the year. If you don’t have an accurate payroll journal, you can obtain this number by adding up federal withholding from employee paystubs.
- If No Wages, Tips, and Other Compensation Are Subject to Social Security or Medicare Tax: If the wages paid are not subject to Social Security or Medicare Tax withholding, check the box here and skip ahead to line 6.
- Taxable Social Security and Medicare Wages and Tips: Lines 5a through 5e are used to report taxable Social Security and Medicare wages and tips. You will also report any Additional Medicare Tax withholding in this space. Line 5f is a Notice and Demand-Tax Due on Unreported Tips.
- Total Taxes Before Adjustments: Enter the total of all taxes withheld.
- Current Quarter’s Adjustments for Fractions of Cents: Enter adjustments for fractions of cents due to rounding for both Social Security and Medicare taxes withheld.
- Current Quarter’s Adjustment for Sick Pay: Enter Social Security and Medicare taxes withheld and deposited by third-party sick pay payers.
- Current Quarter’s Adjustment for Tips and Group-Term Life Insurance: Enter any adjustments for the uncollected employee share of both Social Security and Medical taxes on tips or on group-term life insurance premiums paid for former employees.
- Total Taxes After Adjustments: Add Lines 6, 7, 8, and 9 to obtain the correct total.
- Qualified Small Business Payroll Tax Credit for Increasing Research Activities: For businesses that qualify, Form 8974 must be filled out and attached to Form 941 to claim the credit. See the IRS for more information on Form 8974 and who is eligible for the credit.
- Total Taxes After Adjustments and Credits: This is the total tax amount that is due.
- Total Deposits for This Quarter: Enter the total amount of tax deposits made for the quarter.
- Balance Due: Enter the amount of tax due for the year.
- Overpayment: If you’ve paid too much in tax for the year, you will enter the overpayment amount on this line.
Form 941, Part 2
Line 16 Tax Liability for the Quarter. If Line 12 is less than $2,500, the prior quarterly return was less than $2,500, and there was no next-day deposit obligation for $100,000, you can check the box on Line 16 and move to Part 3. Line 16 is also where you will determine if you are a semiweekly or monthly depositor.
Form 941, Part 3
Line 17. If Your Business Has Closed…
This is filled out only if your business has closed or you no longer pay wages. Check the box on Line 17 and enter the date that you last paid wages.
Line 18. If You’re a Seasonal Employer…
If you only hire employees seasonally, check the box on Line 18
Form 941, Part 4
Part 4 is used if you wish to designate an employee or paid preparer or service to talk with the IRS about Form 941.
Form 941, Part 5
Sign here, and you’re all set. Note that approved signers for 941s include the Sole Proprietor, Corporation President, Vice President, or Principal Officer, Partnership Member or Partner, Owner of an LLC, or Fiduciary of a Trust or Estate.
And that’s all, folks!
If you’ve done a good job of payroll accounting throughout the year, filling out your 941 should be fairly straightforward. Be sure to review your return for accuracy and send deposits on or before the due dates. If you use a payroll service provider, your 941 will likely be completed for you.
If you have any questions or seek additional Form 941 instructions, you can find help on the IRS website.