Unlike individual taxpayers who only have to file one tax return per year, most businesses are required to file quarterly tax returns. On Form 941, also known as the Employer’s Quarterly Federal Tax Return, businesses must report the income taxes and payroll taxes that they’ve withheld from their employees’ wages — as well as 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. This guide explains everything you need to know about IRS Form 941, along with step-by-step instructions to help you complete this form.
What is Form 941?
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.
More specifically, completing Form 941 includes reporting:
Wages you’ve paid.
Tips your employees have reported to you.
Federal income tax you withheld from your employees.
Employer and employee shares of Social Security and Medicare taxes.
Additional Medicare tax withheld from employees.
Current quarter’s adjustments to Social Security and Medicare taxes for fractions of cents, sick pay, tips and group-term life insurance.
Qualified small-business payroll tax credit for increasing research activities.
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.
Who has to file IRS Form 941?
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:
Seasonal businesses don’t have to file during quarters when they haven’t hired anyone.
Businesses that hire only farmworkers.
People who hire household employees, such as maids or nannies.
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.
What is the deadline for filing 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:
First quarter: April 30, for the period covering Jan. 1 to March 31.
Second quarter: July 31, for the period covering April 1 to June 30.
Third quarter: Oct. 31, for the period covering July 1 to Sept. 30.
Fourth quarter: Jan. 31, for the period covering Oct. 1 to Dec. 31.
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.
How to submit IRS Form 941
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 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 the form. 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 instructions: A step-by-step guide
IRS Form 941 is a two-page form with a lot of information packed into it. It has five parts, with an additional payment voucher at the end if you’re submitting the form by mail with payment. Here's a step-by-step guide to IRS Form 941 instructions:
Step 1: Gather information needed to complete Form 941
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:
Basic business information, such as business address and employer identification number or EIN.
Number of employees.
Total wages you paid this quarter.
Taxable Social Security and Medicare wages for the quarter.
Total amount of federal income taxes, Social Security tax and Medicare tax withheld from employees’ wages this quarter.
Employment tax deposits that you’ve already made for the quarter.
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, 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.
Step 2: Fill in the business information at the top of Form 941
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
Step 3: Fill in Part 1 of Form 941
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 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 1: Number of employees you’ve paid for the quarter.
Line 2: Total wages, tips and other compensation you’ve paid for the quarter.
Line 3: Federal income tax withheld from wages, tips and other compensation you’ve paid for the quarter.
Line 4 will ask you to check the box if the wages, tips and other compensation you’re paid isn't subject to Social Security and Medicare tax. This won't 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
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.
Line 5a: $25,000 x 0.124 = $3,100.
Line 5b: $5,000 x 0.124 = $620.
Line 5c: $30,000 x 0.029 = $870.
Line 5d: Leave blank since employee doesn’t earn more than $200,000 per year.
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.
Photo credit: IRS
Step 4: Fill in Part 2 of Form 941
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.
Photo credit: IRS
Step 5: Fill in Parts 3 and 4 of Form 941
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.
Photo credit: IRS
Step 6: Review Form 941 and fill in Part 5
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.
Photo credit: IRS
Step 7: Submit Form 941 to the IRS and pay any remaining balance
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
Tax deposits and Form 941
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.
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, 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.
IRS Form 941: Related tax forms
One of the reasons business taxes are so complex is that there’s never just a single return to file, and you may need to complete other, related forms. Here a few to keep in mind:
Form 941 Schedule B: Once again, you’ll file Schedule B along with Form 941 if you’re a semiweekly depositor. If you have more than $50,000 in tax liability for the quarter, you’re a semiweekly depositor. Schedule B breaks down your tax liability for each day of the quarter.
Form 941-X: If you make an error on a previously filed Form 941, file IRS Form 941-X to correct the mistake. You’ll need to be prepared to provide a written statement of how you discovered the error and calculated the corrections.
Form 944: Small businesses that pay $4,000 or less in wages in a calendar year may be able to file IRS Form 944 annually instead of filing the quarterly Form 941. However, you’ll need to apply and receive approval from the IRS to do so.
Form 940: In addition to income tax withholding and Social Security and Medicare tax, employers also need to file and pay federal unemployment taxes or FUTA. These get reported on IRS Form 940.
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.
A version of this article was first published on Fundera, a subsidiary of NerdWallet.