IRS Form 941: Who Needs to File It and How to Fill It Out

What Is IRS Form 941?

Businesses with employees must file IRS Form 941 on a quarterly basis to report income taxes, social security taxes, and Medicare taxes that they’ve withheld from employee paychecks. This form 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 is not something you look forward to. But the IRS doesn’t easily let businesses forget their tax 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-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. Stay in the clear and keep your finances in order by understanding everything that you need to know about IRS Form 941.  

Who Has to File 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 farm workers
• 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 can 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 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. And returns that you send over snail mail are 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.

H&R Block

How to Submit 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 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 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 snail mail the Form 941 return to the address listed in the IRS’s instructions. If you’re mailing in your return with a payment, be sure to include the payment voucher on the third page of Form 941.

Internal Revenue Service

How to Fill out Form 941

IRS Form 941 is a two-page form with a lot of information packed into it.

You must report the following withholdings and taxes on IRS Form 941:

• Federal income taxes that you withheld from your employees’ paychecks
• Social security and Medicare taxes (collectively called FICA taxes) that you withheld from your employees’ paychecks
• Calculation of what you have to pay for the employer portion of social security and Medicare tax
• Adjustments for tips, sick pay, and business tax credits

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.

You’ll need the following information to complete and submit Form 941:

• Basic business information, such as business address and employer identification number
• 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

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.

How to Calculate Taxable Social Security and Medicare Wages

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 stand in for the percentage of wages and tips that gets deducted for social security and Medicare tax. The 2018 rate for social security tax is 12.4%, evenly divided between employer and employee. The first $128,400 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 2018 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

Calculating Your Total Employment Tax Liability

When you’re done inputting your taxable social security and Medicare wages into Form 941, you’ll be all set to calculate your total employment tax liability for the quarter. At this point, you’ll need to make adjustments for sick pay, life insurance, and tax credits that your small business is claiming. 

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. Payroll tax credits are available to companies that engage in research and development in technology, science, medicine, or related fields.

Once that’s done, you can calculate your total employment tax liability on line 12. Subtract any deposits that you’ve already made for the quarter on line 13. 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. Or, you can mail in the payment along with the payment voucher on the third page of the form 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.

EFTPS, U.S. Department of the Treasury

Tax Deposits and Form 941

Employment tax deposits are often confusing to small business owners. The confusion stems from the fact that the IRS has different deadlines for paying tax deposits and filing Form 941.

As we mentioned above, there are quarterly deadlines for filing Form 941. However, most businesses should not wait until filing 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 either a monthly or semi-weekly employment tax deposit schedule, depending on the size of the business’s tax liability. You can pay your 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).

Related Tax Forms

Once you complete and file IRS Form 941, you might have a need for other, related forms.

• Schedule B: 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. Be prepared to provide a written statement of how you discovered and calculated the corrections.
• Form 944: Small businesses that pay $4,000 or less in wages in a calendar year can file IRS Form 944 annually instead of the quarterly Form 941.
• Form 940: In addition to income tax withholding and social security and Medicare tax, employers also need to file and pay federal unemployment taxes (FUTA). These get reported on IRS Form 940.

Your accountant or tax professional should be able to assist you with filing these forms. 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.

IRS Form 941: DIY or Outsource It

IRS Form 941 is an important form for small businesses with employees. If you have employees, you’re already withholding income tax, social security tax, and Medicare tax. Form 941 is what the IRS uses to keep track of those deductions and to calculate the employer’s employment tax liability.

Make sure you stay on top of the quarterly deadlines for filing Form 941 to avoid tax penalties. If you’d rather outsource this work, choose a small business payroll service that will file the tax paperwork for you, ensure that you don’t miss any IRS deadlines, and help you stay compliant.

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