How to Complete and File Form 941 for Payroll Taxes
Form 941: An Employer's Quarterly Federal Tax Form
If you have been paying employees, and you have been withholding federal income taxes and Social Security and Medicare taxes, you must report the amounts that you have been withholding to get a total amount of these taxes, on IRS Form 941.
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 new tax credits during the coronavirus emergency. Your business can take the tax credits early by deferring your share (as an employer) of Social Security taxes. The tax credits are:
An Employee Retention Tax Credit to encourage businesses to keep paying employees if the business has been affected by COVID-19.
Sick Leave and Family Leave Tax Credits to help employers that must give paid sick leave and family leave to employees who can't work due to COVID-19, for themselves and others.
You can report the deferral of employment taxes using Form 941. This form will be changed for the second quarter of 2020 for this purpose.
For more information on these tax credits and how to defer them see this IRS article on Deferral FAQ article from the IRS.
What Is Form 941?
The taxes and withholding you must report on this form include:
In addition, the form is used to:
- Adjust amounts due,
- Calculate a total payroll tax liability,
- And subtracting amounts already paid to get a final amount of overpayment or underpayment.
When is Form 941 Due?
IRS Form 941 is an important quarterly payroll tax form for every employer, and it's due four times each year:
- March 31 for Quarter 1: January, February March
- June 30 for Quarter 2: April, May, June
- September 30 for Quarter 3: July, August, September
- December 31 for Quarter 4: October, November, December.
When due dates land on a holiday or a weekend day, the adjusted due date will be the next business day. For example, if the July 31 due date is a Saturday for that year, the due date for that payment would be Monday, August 2.
If you have made your payroll tax deposits for the quarter completely and on time, you have 10 more days after the due date above to file form 941 for the quarter. Here are the filing dates if you meet the criteria for the 10-day extension:
- For the first quarter, ending March 30, you must submit by May 10.
- For the second quarter, ending June 30, you must submit by August 10.
- For the third quarter, ending September 30, you must submit by November 10.
- For the fourth quarter, ending December 31, you must submit by February 10.
Information About FICA Taxes
Here are a few reminders for IRS Form 941:
- The current Social Security rate is 6.2% for employees and employers, for a total of 12.4%. The Social Security wage limit changes each year. This limit is the maximum annual pay subject to Social Security tax.
- The Medicare tax rate is 1.45% each for employees and employers, for a total of 2.9%. There is no maximum wage limit for Medicare tax.
- Employers must begin withholding the additional Medicare tax of 0.9% when an employee's income reaches $200,000 for the year.
How Do I Complete Form 941?
Before beginning, check the Social Security maximum for the year and make sure you have stopped Social Security withholding for higher-income employees. Also, make sure you include the additional Medicare tax when an employee's wages reach $200,000 for the year.
Check to use the correct income types for Social Security purposes. Read more about Social Security wages for FICA tax for more information on what wages to count for this calculation.
This is a general overview of the steps in completing Form 941. It's not intended to be complete and detailed. For more details, see the IRS Instructions for Form 941.
Form 941 is a quarterly report, so the numbers you include are for the specific quarter. Be sure to check the correct "Report for this Quarter" box at the top right of the form.
Part 1 is the reporting and calculation of your payroll tax liability.
Line 1: The number of employees who were paid during the quarter. Include employees who received wages, tips, or other compensation for the quarter.
Line 2: 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: The total federal income tax withheld from employee compensation during the quarter, including wages, tips, fringe benefits, and supplemental unemployment compensation benefits.
Line 4: If no employee compensation was subject to Social Security or Medicare tax, check this box.
Lines 5a–5e: This section has two columns for each entry. Column 1 is the total, and Column 2 is the tax percentage calculation.
- 5a: Enter the total taxable social security wages in Column 1, multiply by .124, and enter the amount in Column 2. Remember that social security wages are paid only up to the annual social security maximum amount for each employee.
- Line 5b: Do the same as 5a for tips.
- Line 5c: Enter total taxable Medicare wages and tips in column 1, multiply by .029, and enter the result in Column 2.
- Line 5d: Enter the taxable wages and tips subject to the additional Medicare tax, and multiply by 0.009.
Add Column 2 amounts from 5a, 5b, 5c, and 5d, and enter the total in 5e.
Line 5f. Section 3121(q) Notice and Demand – Tax Due on Unreported Tips. If the IRS determines that a tipped employee has underreported tips, they will send you a Section 3121(q) Notice and Demand. You must report and pay the employee and employer part of FICA taxes on these unreported tips. You are not liable to withhold and pay the employee share of FIA taxes on unreported tips.
The next section is adjustments to the total:
- Line 7 is an adjustment for fractions of cents. Use traditional rounding—under 1/2, round down; 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.
- Line 11 is an adjustment for a tax credit for research activities.
Finally, subtract payroll tax deposits you made during the quarter, to get a balance due or an overpayment.
- Line 13 is the total deposits for the quarter.
- If the total deposits are more than the total taxes on line 12, you have an overpayment. you can apply it to your next return or ask for a refund.
- If total deposits are less than the total taxes on Line 12, you have a balance due.
Part 2 is the Payroll Deposit Schedule. You must provide information about your payroll deposit schedule. If you are a monthly depositor, you must enter the tax liability for each month in the quarter. If you are a semiweekly depositor, you must attach Schedule B: Form 941, showing the tax liability for each semiweekly deposit.
If the total tax amount on Line 12 is less than $2,500 or 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, you may pay the amount with Form 941 or you may deposit it. Otherwise, you must make deposits according to your deposit schedule (monthly or semi-weekly).
Part 3 asks questions about your business.
Part 4 asks if the IRS may communicate with your third-party designee. This is the person who prepared your Form 941 and who is responsible for the preparation of payroll taxes.
Part 5. Don't forget to sign the form and include the other information 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 to avoid fines and penalties.
How and Where Do I Submit Form 941?
You can submit Form 941 electronically using Federal E-file. You can E-file Form 941 and pay any balance due electronically by using tax preparation software or through your tax professional. The IRS page "Where to File Your Taxes for Form 941" includes mailing addresses.
How Do I Pay Taxes with Form 941?
If you have paid the complete amount of your payroll taxes during the months covered by this form, you should see "$0" due. If you owe taxes, use the IRS EFTPS tax payment system to pay your payroll taxes.
You cannot wait until you file Form 941 and pay all taxes for the quarter at that time. You must make either monthly or semi-weekly deposits, depending on the amount owed.
Can I Use IRS Form 944?
If you expect your employment taxes (FICA Tax and withheld federal income tax) for the year to be $1,000 or less, you may be able to file an annual federal tax return on Form 944 instead of filing quarterly using Form 941. You must submit a written request or call the IRS by a specific date. This article by the IRS explains how to request to file using Form 944.
Can I Use a Payroll Service for Form 941?
If you hire a payroll service to complete Form 941, remember that it's your responsibility as the employer to file payroll tax reports like Form 941 and to pay your federal tax liabilities. If your payroll service fails to file and pay on time, the IRS may assess your business penalties and interest due, and you may also be held personally liable for certain unpaid federal taxes.
IRS. "Deferral of Employment Tax Deposits and Payments Through December 31, 2020." Accessed May 28, 2020.
IRS. "About Form 941, Employer's Quarterly Federal Tax Return." Accessed May 3, 2020.
IRS. "Instructions for Form 941." Page 4. Accessed May 3, 2020.
IRS. "Tip Recordkeeping and Reporting." Accessed May 3, 2020.
IRS. "Instructions for Form 941 Employer's Quarterly Federal Tax Return." Page 9. Accessed May 3, 2020.
IRS. "Instructions for Form 941 Employer's Quarterly Federal Tax Return." Page 3. Accessed May 3, 2020.
IRS. "Outsourcing Payroll Duties." Accessed May 4, 2020.