IRS Tax Form 941 for Payroll Tax Filing
Here’s everything you need to know about payroll tax filing, quarterly returns, and form 941.
Remember the thrill of your first paycheck? Remember feeling less thrilled when you discovered that your employer held some money for income taxes and Social Security?
That is payroll tax. Likewise now it’s your turn for payroll tax filing and to file form 941 and be the bearer of bad news. Certainly, you have employees, therefore, you pay into their income & FICA (Social Security & Medicare) taxes by withholding some of their paychecks.
Here, we’ll go over IRS Form 941, the tax form that makes all this possible.
What is Form 941?
Employers must submit IRS Form 941, also known as the Quarterly Federal Tax Return, to report three different taxes via payroll tax filing:
Most noteworthy is the federal income tax in addition to other payroll taxes withheld from employee paychecks like social security and Medicare. Finally the employer’s portion of social security or Medicare tax. You use Form 941 quarterly to report these taxes on your payroll tax filing.
Most likely, you’ll make the tax payments themselves monthly or every two weeks through direct deposits (more on that below), depending on the dates wages are paid.
Who must file Form 941?
If you pay wages to an employee (remember: there’s a difference between employees and independent contractors) you have to withhold or ‘hold onto’ some of their pay to cover things like income taxes, social security, and Medicare therefore you have to file Form 941.
If you’re a seasonal employer, you only need to File Form 941 in quarters where you’ve paid employee’s wages. If you’re paying less than $1,000 in employment tax in a tax year, you’re off the hook (but you must file Form 944 instead). And if your employees are “household employees” (a house cook or nanny, that kind of thing), you’ll just fill out Schedule H from Form 1040.
How do I withhold taxes?
If you’re a new employer, have never withheld money from an employee’s paycheck, and never filed Form 941, talk to an accountant to make sure your bookkeeping and payroll are set up and that you’re signed up for EFTPS deposits. You can do this over the phone by calling the IRS at 1-800-555-3453 (have your bank account info ready) or online at the EFTPS website. You’ll then have to create a password for your Electronic Federal Tax Payment System account, which you then must log in here.
What if I have no employees working for me this quarter?
You still have to file Form 941. Only seasonal and agricultural employers who show their status on line 18 of the form don’t have to file Form 941. (See the IRS’s instructions to Form 941 for more information about who doesn’t have to file.)
What do I need to have ready before payroll tax filing?
Have your tax and payroll records on hand, and information about taxable tips your employees collected this quarter (here’s the IRS’s guide to tip record keeping).
How do I submit it to the IRS?
You can e-file Form 941 yourself online, or you can have someone else do it for you.
What does it look like?
The current Form 941 PDF from the IRS contains a two-page form, a voucher, and a fourth extra page of instructions. Besides the employer information section at the top, the form contains five parts.
The employer information section
Here you’ll show which period you’re reporting for, your name, address, and employer identification number (EIN). Don’t use your social security number (SSN) or individual taxpayer identification number (ITIN) here. You can apply for an EIN online at IRS.gov/EIN.
Line 1: Asks you for the number of employees working for you.
Line 2: Asks for any wages, tips, or other compensation you paid them.
Line 3: Asks for income taxes you withheld from employees’ paychecks. If you have no wages, tips, or other compensation subject to social security or Medicare to report this quarter, check the box on line 4.
Line 5: This is the heart of Form 941. It’s all about calculating your tax obligations and making sure they’re up to date. Line 5a will ask you to multiply total wages by 12.4% to calculate your social security tax obligation on wages.
Line 5b: Asks you to do the same thing for tips.
Line 5c: Is all about calculating Medicare taxes. The current rate of 2.9% covers both your portion and the employees’ portion.
Line 5d: Is about any additional taxes on employee compensation over $200,000, which is taxed at 0.9% and paid by employees.
Line 5e: Will ask you to total up all the amounts above.
Line 5f: Is for employers who have been asked
by the IRS to pay additional taxes on unreported tips. (See the instructions for 941 for more.)
Lines 6-10: Will walk you through calculating your total taxes after adjustments, which you’ll make to account for things like sick pay and group-term life insurance. Line 11 is about the qualified small business payroll tax credit for increasing research activities, which you can read more about Instructions for Form 941.
Lines 12-14: Take your total taxes and subtract any payments you’ve already made to come up with your total balance due. If you overpaid (i.e. line 13 is greater than line 12) you report that on line 15.
This part is where you’ll figure out how often you must send the IRS the taxes you calculated in part 1. Most employers will have to deposit monthly or every two weeks. If you deposit semi-weekly, you must explain your tax liability on Schedule B of Form 941. If you owe more than $100,000 in taxes for the quarter, you must deposit these taxes immediately.
Here you’ll show whether you’ve stopped paying wages altogether and whether you have any seasonal employees. If you do, you might not need to file 941 every quarter.
If you want to let an accountant, lawyer, or tax prep professional discuss this form with the IRS on your behalf, this is where you’ll give them permission to do so.
Sign and date here to ensure everything you’ve entered is correct.
Form 941-V, Payment Voucher
If you have a total balance due (i.e. line 14 contains a positive number) use this voucher to pay any taxes you owe to the IRS.
When do I need to Form 941?
If you’ve never filed 941, you must file your first copy at the end of the quarter in which your business first started paying employee wages. You then must file on the last day of the month that follows the end of every quarter after that.
If you’re not sure when the quarter begins and ends, consult the following chart from the IRS:
|The Quarter Includes…||Quarter
941 Is Due
quarter: January, February, March
quarter: April, May, June
quarter: July, August, September
quarter: October, November, December