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IRS Form 941 is a quarterly tax form businesses with employees must file to report income taxes, social security taxes, and Medicare taxes they’ve withheld from employee paychecks. IRS Form 941 is also used to report the employer’s quarterly portion of social security and Medicare taxes. Filing deadlines are the last day of January, April, July, and October.
As a small business owner, we’re venturing to guess that filing taxes and business accounting generally is not something you look forward to. But the IRS doesn’t easily let businesses forget their tax-filing responsibilities. Unlike individual taxpayers, who only have to file one tax return per year, most businesses have to file quarterly tax returns.
On Form 941, also known as the Employer’s Quarterly Federal Tax Return, businesses have to report the income taxes and payroll taxes that they’ve withheld from their employees’ wages. This is also the form where you calculate and report the employer’s social security and Medicare tax burden.
Failure to file this form on time or underreporting your tax liability can result in penalties from the IRS. Therefore, in this IRS Form 941 guide, we’ll explain everything you need to know to stay in the clear and keep your finances in order with regard to this tax responsibility. We’ll also provide step-by-step IRS Form 941 instructions so you’ll know how to complete this form for your business taxes.
As we mentioned, IRS Form 941 is a quarterly tax form used to report the federal income taxes and FICA taxes (social security and Medicare taxes) you’ve withheld from your employees’ paychecks. More specifically, completing Form 941 includes reporting:
After accounting for all of these items, IRS Form 941 will tell you how much money you should have remitted or will need to remit to the government to cover your employment tax responsibilities for the quarter.
Now that we know more about what Form 941 is, let’s discuss who has to file this IRS business form. Most businesses with employees have to file the federal tax Form 941 each quarter to report and calculate employment taxes. Only the following types of businesses don’t have to file Form 941:
If you predict that you will pay $4,000 or less in wages in the coming calendar year, then you may be able to submit the annual Form 944 instead of the quarterly Form 941. Form 944 is designed to let the smallest businesses report and pay withheld income and payroll taxes once per year instead of quarterly. However, you first have to contact the IRS and get permission to file Form 944 instead of Form 941.
The deadline for filing Form 941 is one month following the last day of the reporting period. For example, the first quarter of the calendar year ends on March 31, and you get an extra month to file IRS Form 941, bringing the deadline to April 30. Here are the calendar deadlines for filing Form 941 each quarter:
If the due date falls on a weekend or holiday, then you have to file by the next business day. If you file by mail, your return will be tracked according to the date of postage. You get an additional 10 business days to file if you’ve paid your employment tax deposits in full and on time for the entire quarter that’s covered by the return. We’ll explain more about tax deposits in a bit.
The fastest way to file Form 941 is through the federal e-File system. Business taxpayers can access e-File through TurboTax, H&R Block, or any other tax preparation software. Your business accountant or tax professional should also have access to e-File. You can sign up to electronically make employment tax deposits and income tax payments through the Federal EFTPS—Electronic Federal Tax Payment System. Any tax payments related to Form 941 can be made through EFTPS.
If you choose to, you can also mail the Form 941 return to the address listed in the IRS Form 941 instructions. It’s important to note that the mailing address will depend on the state your business is located in, whether you’re submitting payment with your return, and what quarter you’re filing for, so you’ll want to be sure you have the correct address if you’re mailing IRS Form 941. Additionally, if you’re mailing in your return with a payment, you’ll want to be sure to include the payment voucher on the third page of Form 941.
IRS Form 941 is a two-page form with a lot of information packed into it. The form is broken into five parts, with an additional payment voucher at the end to be used if you’re submitting your Form 941 by mail with payment. This being said, let’s get started with our step-by-step IRS Form 941 instructions:
In order to effectively and efficiently complete IRS Form 941, you’ll want to gather the information that you’ll need ahead of time. This information includes:
If you use a payroll or accounting software, you should be able to use this platform to quickly retrieve the data you’ll need to complete IRS Form 941. Additionally, as we’ll explain more about in a bit, most employers are required to make employment tax deposits on a monthly or semi-weekly basis.
Although individual taxpayers pay taxes only once per year, the IRS prefers to receive tax receipts on an ongoing basis from businesses. Form 941 asks for the total amount of your deposits for the quarter. You should be able to get this number by looking at your payment history in EFTPS or at your business bank account statements.
After you’ve gathered all of your necessary information, you’re ready to start filling in Form 941. The first section you’ll want to complete, as seen in the photo below, is located at the very top of the form. This section asks for basic information about your business, as well as the quarter you’re filling for. Therefore, in this section, you’ll want to fill in your EIN, name and trade name (if applicable), and address.
Photo credit: IRS
Once you’ve filled in your basic business information, you can move on to Part 1 of IRS Form 941. Part 1 takes up the remainder of the first page of this form, broken down into 15 lines, and will ask for the information we listed above: wages you’ve paid, federal income taxes withheld, etc.
This will be the most involved section for Form 941, largely due to the calculations involved on line 5. However, you should easily be able to complete lines 1-4 based on the information you’ve gathered from your accounting or payroll software. These lines will ask for:
Line 4 will ask you to check the box if the wages, tips, and other compensation you’re paid is not subject to social security and medicare tax. This will not apply to most businesses, so you can leave it blank. However, IRS Publication 15 explains the types of businesses that fall into this exemption if you’re unsure if it applies to you.
Photo credit: IRS
As we mentioned, the most confusing section of Form 941 is found on lines 5a to 5d, where you’re asked to calculate your taxable social security and Medicare wages. You’ll see a lot of decimals on this section of the form, which might leave you shaking your head. Those decimals are a stand-in for the percentage of wages and tips that get deducted for social security and Medicare tax.
The 2019 rate for social security tax is 12.4%, evenly divided between employer and employee. The first $132,900 of an employee’s annual income and tips are subject to social security tax. You should stop including an employee’s wages and tips on lines 5a and 5b after surpassing that amount.
For Medicare taxes, the 2019 rate is 2.9%, evenly divided between employer and employee. All wages and tips are taxable for Medicare purposes, without limit. However, once an employee’s annual income reaches $200,000, there’s an additional tax of 0.9%.
To make sure you end up with the right calculations, you need to break down the wages by type for lines 5a and 5b (i.e., regular wages or tips). Here’s an example of lines 5a to 5d for an employee who earned $25,000 this quarter in wages and $5,000 this quarter in tips.
Once you’ve completed these calculations in lines 5a through 5d, you’ll add column 2 from these lines and fill in the total on line 5e. Then, on line 6, you’ll add lines 3, 5e, and 5f (if applicable) to calculate your total taxes before adjustments and fill in that total.
Photo credit: IRS
After this, you’ll be all set to calculate your total employment tax liability for the quarter. You’ll complete lines 7 through 9 if your business has any adjustments to report for fractions of cents, sick pay, tips, and group-term life insurance. The adjustments for sick pay and life insurance come into play if, for instance, an insurance company reimbursed a portion of your employee’s wages while they were on short-term disability. On line 10, you’ll fill in your total taxes after adjustments by combining the amounts in lines 6 through 9.
Next, if your business can claim payroll tax credit for increasing research activities, you’ll complete line 11 and attach IRS Form 8974. Payroll tax credits are available to companies that engage in research and development in technology, science, medicine, or related fields. On line 12, you’ll subtract line 11 from line 10 in order to calculate your total taxes after adjustments and credits and fill in this total.
Then, on line 13, you’ll subtract any deposits that you’ve already made for the quarter—we’ll explain tax deposits in greater detail below. If your liability is higher than the deposits you’ve already made, the form will indicate a balance due on line 14.
You should pay this balance on EFTPS. As an alternative, you can mail in the payment along with the payment voucher (Form 941-V) on the third page of Form 941 if your balance for the current quarter is less than $2,500, or if you’re a monthly depositor who owes a small balance (no more than $100 or 2% of the total tax due).
If your employment tax liability is less than the deposits you’ve made, the overpayment gets noted on line 15. You can choose to receive a refund check or have the overpayment applied as a credit on your next tax return by checking one of the boxes next to line 15.
After completing line 15 on the first page of IRS Form 941, you’ll be done with Part 1. On page two of the form, you’ll see that you need to write in your name and EIN again at the very top of the page.
Next, you’ll start completing Part 2, which asks about your deposit schedule and tax liability for the quarter. In this part, you’ll indicate whether you’re a monthly or semiweekly schedule depositor. If you’re a monthly depositor, you’ll fill in the three boxes labeled Month 1, Month 2, and Month 3—this total must equal the number on line 12 on Part 1.
If you’re a semiweekly depositor—meaning you have more than $50,000 for tax liability for the quarter—you’ll complete Form 941 Schedule B and attach it with this form. Schedule B breaks down your tax liability for each day of the quarter.
Once you’ve completed Part 2, you’ll be able to move down on the second page to start filling in Parts 3 and 4. In Part 3, you’ll be asked if your business has closed or if you stopped paying wages or if you’re a seasonal employer who doesn’t have to file IRS Form 941 every quarter. If either of these lines (17 or 18) apply to your business, you’ll complete them, otherwise, you’ll simply leave Part 3 blank.
In Part 4, you’ll be asked whether you authorize a third-party designee to speak with the IRS on behalf of your business with regard to this return. A third-party designee might be your CPA, enrolled agent, or tax advisor. If you are granting authorization a third-party designee, you’ll check the “yes” box and fill in the person’s name and phone number. If you’re not, you’ll check the “no” box.
After completing Parts 3 and 4, you’re almost finished filling out Form 941. Before you sign and complete Part 5, you’ll want to review everything you’ve filled in thus far to ensure that the information is correct. If you work with a tax advisor or business accountant, you may want them to review the return as well. Once you’ve reviewed your completed IRS Form 941, you’ll be able to sign and date Part 5.
If you’ve used a paid preparer, in other words, someone like a CPA or tax professional who you’ve paid to complete this form on your behalf, they’ll complete the “Paid Preparer Use Only” section underneath your signature.
Finally, you’re ready to submit Form 941 to the IRS. If you’re filing online, as we mentioned above, you’ll be able to submit through EFTPS and pay any balance you have through that system. If you’re mailing Form 941, you’ll submit it to the proper address according to the IRS Form 941 instructions document and include the payment voucher found on the third page of the form, if necessary, in order to settle any remaining balance.
EFTPS, U.S. Department of the Treasury
As we mentioned throughout our step-by-step IRS Form 941 instructions, you should be paying employment tax deposits either monthly or semi-weekly. These deposits are often confusing to small business owners because the IRS has different deadlines for paying tax deposits and filing Form 941.
Like we’ve explained, Form 941 has quarterly deadlines. However, most businesses should not wait until filing IRS Form 941 to actually pay their employment taxes. The IRS has a pay-as-you-go system for paying employment taxes. Businesses generally fall into the monthly or semi-weekly employment tax deposit schedule, as we mentioned, depending on the size of the business’s tax liability.
You can pay these deposits on the EFTPS. The only time when you can make a payment along with filing Form 941 is if your total tax for the current quarter is less than $2,500, or if you’re a monthly depositor who owes a small balance (no more than $100 or 2% of the total tax due, whichever is greater).
Ideally, if you’ve paid the complete amount for your employment taxes for the quarter, your balance due on line 14 of Form 941 will be $0.
One of the reasons business taxes are so complex is that there’s never just a single return to file. This being said, and as we’ve mentioned throughout our IRS Form 941 instructions break down, you might have a need to complete other, related forms. Here a few to keep in mind:
It’s also important to note that some states have analogs to Form 941 that you have to file to report income withholdings and employer taxes at the state level.
At the end of the day, IRS Form 941 is an essential tax form for small businesses with employees. If you have employees, you’re already withholding income tax, social security tax, and Medicare tax—and Form 941 is what the IRS uses to keep track of those deductions and to calculate your employment tax liability. Therefore, it’s not only important to complete Form 941 accurately and quarterly, but it’s also important that you file this form to the IRS on time. As with any business tax form, failure to submit Form 941 correctly by the quarterly due date may lead to penalties from the IRS.
This being said, there are a few ways you can make this process easier for your business. First, you can utilize an accounting or payroll software to organize your information. With one of these types of software, you’ll be able to track the wages you pay your employees and the taxes you deduct from their paychecks—which will make it much easier to gather these numbers when it’s time to file IRS Form 941. Additionally, many accounting and payroll software systems include tax capabilities and some even allow you to file your taxes electronically through their platform.
Next, whether you wholly outsource your business tax processes or simply get professional assistance with the forms you’ve completed, it’s always worth working with a CPA, enrolled agent, or other business tax advisor. These professionals will be able to answer any questions you have with regard to Form 941 or any of your tax forms, as well as help you ensure you’re completing each return accurately and completely.
Ultimately, by investing in accounting or payroll software as well as the help of a tax professional, you’ll be putting your business in the best situation possible when it comes to handling your taxes.