How to File IRS Form 941

IRS Form 941 Explained

IRS Form 941

The Balance / Daniel Fishel

IRS Form 941 is the Employer's Quarterly Federal Tax Return. It's used by employers to report tax withholding amounts for estimated income tax payments, employer payments, and FICA taxes, more commonly known as Social Security and Medicare.

You must report the amounts on IRS Form 941 if you've been paying employees and you've been withholding federal taxes from their earnings.

What Is Form 941?

IRS Form 941 is a quarterly report that cites:

  • Withholding of federal income taxes from employee paychecks based on the information from their W-4 forms
  • Withholding amounts due based on your employees' Medicare and Social Security wages
  • Calculation of your employer portion of FICA taxes
  • Tax credits for participation in COVID-19 related tax relief programs
IRS Form 941

Who Uses Form 941?

Employers use this form to report their withholding information to the IRS. Employees don't receive a copy. Form 941 is additionally used to:

  • Adjust amounts due
  • Calculate a total payroll tax liability
  • Subtract amounts already paid to get a final amount of overpayment or underpayment

You might be able to file an annual federal tax return on Form 944 instead of filing quarterly Forms 941 if you expect your FICA taxes and withheld federal income tax for the year to be $1,000 or less. You must submit a written request or call the IRS to exercise this option.

Where to Get Form 941

Form 941 is available online at the IRS website. You can download a blank copy, or you can complete it online then save it to your hard drive and print out the finished copy.

Before You Fill Out Form 941

Check the Social Security wage base for the current year ($137,700 for 2020). Make sure you've stopped withholding Social Security for higher-paid employees based on this threshold. Employees do not have to pay Social Security tax on earnings over this amount.

The Social Security wage base is indexed for inflation, so it can be expected to increase somewhat annually.

Include the additional Medicare tax for employees whose wages reach $200,000 for the year.

How to Fill Out IRS Form 941

Form 941 is a quarterly report, so the numbers you include are just for the specific quarter. Be sure to check the correct "Report for this Quarter" box at the top right of the form.

Part 1

This is the reporting and calculation of your payroll tax liability.

  • Line 1: Enter the number of employees who were paid during the quarter. Include employees who received wages, tips, or other compensation.
  • Line 2: Enter the total taxable compensation paid to these employees during the quarter. This is the same amount that would be included in the employee's W-2 form for this quarter.
  • Line 3: Report the total federal income tax withheld from employee compensation during the quarter, including wages, tips, fringe benefits, and supplemental unemployment compensation benefits.
  • Line 4: Check this box if no employee compensation was subject to Social Security or Medicare tax.
  • Lines 5a–5e: This section has two columns for each entry. Column 1 is the total, and Column 2 is the tax percentage calculation. Enter the total taxable Social Security wages in Column 1, line 5a, and multiply by .124. Enter the amount in Column 2. Do the same for tips on line 5b. Enter the total taxable Medicare wages and tips in column 1, line 5c, and multiply by .029. Enter the result in Column 2.
  • Enter the taxable wages and tips subject to the additional Medicare tax on line 5d, and multiply by 0.009.
  • Add Column 2 amounts from 5a, 5b, 5c, and 5d, and enter the total in 5e.
  • Line 5, Section 3121(q) Notice and Demand – Tax Due on Unreported Tips: The IRS will send you a Section 3121(q) Notice and Demand if it determines that a tipped employee has underreported tips. You must report and pay the employee and employer part of FICA taxes on these unreported tips. You're not liable to withhold and pay the employee share of FICA taxes on unreported tips.

The next section is adjustments to the total:

  • Line 7 is an adjustment for fractions of cents. Use traditional rounding—if under half round down, if half or more round up. Use the negative sign, not parentheses, for decreases.
  • Line 8 is an adjustment for sick pay. This is a reduction for the employee share of Social Security and Medicare taxes that were withheld and deposited by a third-party payer.
  • Line 9 is an adjustment for tips and group-term life insurance. This is a negative adjustment for the uncollected employee's share of FICA taxes on tips and group term life insurance premiums paid for former employees.
  • Lines 11a, 11b, and 11c are adjustments for certain types of tax credits. Line 11a for an adjustment for a tax credit for research activities. Line 11b is for the non-refundable part of the tax credit for qualified sick leave and family leave payments. Line 11c is for the non-refundable part of the Employee Retention Credit.
  • Line 11d totals the taxes for these tax credits, from lines 11a, 11b, and 11c.
  • Line 12 is a calculation for total taxes after adjustments and nonrefundable credits (line 10 minus line 11d).
  • Line 13a is total deposits for the quarter. Line 13b is the deferred amount of the employer share of Social Security tax. Line 13c is the refundable part of the tax credit for qualified sick and family leave wages. Line 13d is the refundable part of the employer retention credit. Line 13e is the total of lines 13a, 13b, 13c, and 13d. Line 13f is the total of advances for the COVID-related tax credits (from filing IRS Form 7200). Line 13g is the total of deposits, deferrals, and refundable credits minus advances, subtracting line 13f from line 13e.

Worksheet 1 in the Instructions for Form 941 can help you calculate your tax refunds and deferments for the qualified Credit for Sick and Family Leave and the Employee Retention Credit.

The next step is to figure out if you have a balance due or an overpayment.

  • You have a balance due if total deposits on line 13g are less than the total taxes on Line 12. Enter the balance due on line 14.
  • You have an overpayment if the total deposits and credits on line 13g are more than the total taxes on line 12. Enter the overpayment amount on line 15. You can apply it to your next return, or you can ask for a refund.

Part 2

Part 2 is the Payroll Deposit Schedule. You must enter the tax liability for each month in the quarter if you're a monthly depositor. Attach Schedule B/Form 941, showing the tax liability for each semi-weekly deposit if you're a semi-weekly depositor.

You can pay any amount due with Form 941, or you can deposit the payment if the total tax amount on line 12 is less than $2,500. You can also deposit if line 12 on last quarter's form 941 was less than $2,500 and you didn't have a $100,000 next-day deposit obligation during the current quarter. Otherwise, you must make deposits according to your deposit schedule, monthly or semi-weekly.

Your tax liability isn't your deposits for each quarter. It's the total tax you owe based on gross payroll minus tax credits and other adjustments for each month. Your tax liability for the quarter must equal the total on line 12.

Parts 3, 4, and 5

Part 3 asks questions about your business, and Part 4 asks if the IRS can communicate with your third-party designee if you have one. This might be someone you hired to prepare your Form 941 or to prepare your payroll taxes.

Don't forget to sign the form in Part 5, and include the other information asked for in this section before you submit the form. Check for errors, especially those that might cause an underpayment. It's better to correct errors before you send in the form because this will help you avoid fines and penalties.

Can Form 941 Be E-Filed?

You can submit Form 941 electronically using Federal E-file, and you can pay any tax balance due electronically by using tax preparation software or through your tax professional.

You can also use the IRS EFTPS tax payment system to pay your payroll taxes if turns out that you owe.

Where to Mail Form 941

The IRS website includes a page explaining where to file your taxes for Form 941, along with mailing addresses.

You can't wait until you file Form 941 to pay all taxes for the quarter at that time. You must make either monthly or semi-weekly deposits, depending on the amount owed.

Requirements for Filing Form 941

IRS Form 941 is due four times each year:

  • April 30 for Quarter 1 (January, February, March)
  • July 31 for Quarter 2 (April, May, June)
  • October 31 for Quarter 3 (July, August, September)
  • January 31 of the following year for Quarter 4 (October, November, December)

The adjusted due date will be the next business day if a due date lands on a holiday or a weekend day. For example, the due date for a July 31 payment would be Monday, August 2 if July 31 falls on a Saturday that year.

You have 10 more days after the due date to file Form 941 for the quarter if you've made your payroll tax deposits for the quarter completely and on time. These are the filing dates if you meet these criteria:

  • By May 10 for the first quarter ending March 30
  • By August 10 for the second quarter ending June 30
  • By November 10 for the third quarter ending September 30
  • By February 10 for the fourth quarter ending December 31

It's your responsibility as an employer to file payroll tax reports like Form 941 and to pay your federal tax liabilities, even if you hire a payroll service. The IRS can assess penalties and interest due to your business if your payroll service fails to file and pay on time. You might also be held personally liable for certain unpaid federal taxes.

Use Form 941 to Take Coronavirus Tax Credit Deferrals

The IRS is allowing businesses to defer payment of certain employment taxes as part of two tax credits introduced during the 2020 coronavirus emergency.

  • The Employee Retention Tax Credit encourages businesses to keep paying employees if the business has been affected by COVID-19. You can take the tax credit early by delaying payments for your employer share of Social Security taxes for certain employees through the end of 2020.
  • The Sick Leave and Family Leave Tax Credits help employers that must give paid sick leave and family leave to employees who can't work due to COVID-19. Your business can take these tax credits by keeping part of employment taxes related to employee wages instead of depositing them.

You can report the deferral of employment taxes using Form 941. This form was changed for the second quarter of 2020 to accommodate this change.

Key Takeaways

  • IRS Form 941 is the Employer’s Quarterly Tax Return.
  • This form reports withholding of federal income taxes from employees’ wages or salaries, as well as Medicare and Social Security withholdings (FICA taxes).
  • Employers can use Form 941 to calculate how much they must contribute to their employees’ Medicare and Social Security taxes.
  • The 2020 Form 941 includes special tax provisions brought about by the coronavirus pandemic.

Article Sources