If you have employees, you must file Form 941 to report any federal withholdings. This form determines your payroll tax liability and helps the IRS track what you owe in Social Security, Medicare, and income tax withholdings. Here’s everything you need to know about Form 941 and what’s included.
What is IRS Form 941?
IRS Form 941 reports the income, Social Security, and Medicare taxes withheld from your employees’ wages. It also details the employer’s share of Social Security and Medicare taxes.
You’ll use this form to reconcile payroll taxes withheld and the total amount deposited with the IRS throughout the quarter.
Who needs to file Form 941?
Most businesses that pay wages to employees need to file Form 941 each quarter, even if they don’t owe any taxes. However, there are some exceptions:
- Seasonal employers only need to file for quarters during which they pay wages.
- Businesses that hire farm or household employees, like nannies or housekeepers, typically file Form 943 or Form 1040 Schedule H instead.
- Employers that owe less than $1,000 in total annual employment tax may be eligible to file Form 944 once per year instead of quarterly.
[Read more: Essential IRS Tax Forms and Deadlines Every Small Business Owner Should Know]
How to prepare quarterly payroll data for Form 941
Before you file, you’ll need to gather together any payroll data for the quarter, including:
- Total wages paid to all employees.
- Federal income tax withheld.
- Employer and employee shares of Social Security and Medicare taxes, including any additional 0.9% Medicare tax for high earners.
- Reported employee tips and other compensation.
- Adjustments for sick pay, tips, or group-term life insurance.
If you offer payroll tax credits, those should also be reflected in your calculations. Payroll software can generate this data automatically, reducing the risk of errors and saving you time each quarter.
How to file Form 941
You can file Form 941 electronically through the IRS e-file system or by mail. Most accounting software, like QuickBooks or Gusto, includes e-filing options that can submit the form and payment automatically. The software can also track deadlines, send payment reminders, and store records for compliance.
When setting up your software, enable automatic tax filing and complete Form 8655 so your provider can file on your behalf. Payments can also be made by check payable to the U.S. Treasury or online via the Electronic Federal Tax Payment System (EFTPS).
Most businesses that pay wages to employees need to file Form 941 each quarter, even if they don’t owe any taxes.
When is Form 941 due?
Form 941 is due on the last day of the month following the end of each quarter:
- April 30 for Q1.
- July 31 for Q2.
- October 31 for Q3.
- January 31 for Q4.
If the deadline falls on a weekend or federal holiday, you’ll need to file by the next business day. Businesses that make all their deposits on time and in full get an additional 10 business days to file.
IRS penalties for late or incorrect filing
The IRS imposes penalties for both late filings and incorrect payments. Common penalties include:
- Late filing: 5% of the unpaid tax for each month the return is late, up to a maximum of 25%.
- Late payment: 0.5% of the unpaid tax per month, up to 25%.
- Incorrect or missing information: Penalties vary depending on the severity of the error but can increase if corrections aren’t made promptly.
To avoid penalties, double check that all employee names, Social Security numbers, and wages are accurate and that your math matches your payroll records. Submitting Form 941 through payroll software or a certified accountant can minimize errors.
[Read more: Contract Worker Forms, Explained: From IRS Forms to Invoices]
Common mistakes to avoid
Some of the most frequent errors on Form 941 include:
- Incorrect calculations: Double check totals for wages, tips, and withheld taxes.
- Omitting data: Ensure all required fields are filled out, including your EIN, signature, and date.
- Using the wrong quarter’s form: The IRS updates forms periodically, so always download the current version from IRS.gov.
If you discover an error after filing, use Form 941-X, listing any corrections in Part 3 and providing explanations for the mistake in Part 4. The timing for filing Form 941-X depends on whether you overpaid or underpaid taxes.
Danielle Fallon-O’Leary contributed to this article.
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