What is Form 941?

As a small business owner or HR manager, you need to be aware of the tax forms you need to file and the compliance regulations you need to abide by. There are numerous annual and quarterly reports that are essential for keeping your organization compliant. Federal Tax Form 941 is no exception.

But what is Form 941, and why do you need to file one for your organization? In this article, we'll cover what IRS Form 941 is, how it works, and the filing requirements for employers.

Takeaways from this blog post:

• Form 941 is a tax form employers use to report federal income tax, Social Security tax, and Medicare tax withheld from employees.
• All organizations with at least one employee must file Form 941 every quarter, with a few exceptions. Employers with $1,000 or less in annual tax liability can use Form 944 instead.
• Form 941 has a specific filing period for each quarter. You can file it by mail or electronic filing.

What is IRS Form 941?

IRS Form 941, also known as the Employer's Quarterly Tax Return, is an essential tax form employers use to report any federal income tax, Social Security tax, and Medicare tax withheld from their employees. You can use this information to calculate your employment taxes.

This form replaced¹ Form SS-LA for the Social Security Administration (SSA) and IRS Form W-1 for reporting income taxes withheld in 1950.

Who must file Form 941?

All organizations with at least one employee must complete and file this form every quarter. However, some organizations with $1,000 or less in annual tax liability can get an exemption from the IRS. These organizations can use Form 944 to report their federal income tax annually.

The IRS doesn’t require seasonal businesses to file a Form 941 during quarters with no seasonal employees. Employers of only farm employees and employers of only household employees also don't need to file Form 941 but should file Schedule H from Form 1040.

When is Form 941 due?

Form 941 is due on a quarterly basis.

The form is due by the following dates²:

• 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 filing deadline falls on a weekend or a federal holiday, the due date is pushed to the following business day.

What happens if you don't file Form 941?

If you don’t file Form 941, prepare to pay a penalty. There’s a penalty³ for late deposits that ranges from 2% to 15%, depending on the duration of the delay.

How to file Form 941

Now that we've covered what Form 941 is, let's discuss the filing process. You can find the current version of the form and complete instructions on the IRS website⁴.

Fill in your primary business information

At the top of the form, start by filling out the section with your business information. You'll provide your employer identification number (EIN), business name, trade name (such as a DBA), and business address. You'll also check the current quarter you're filing for.

Complete Part I

In box 1, you'll provide the number of employees at your organization who received wages, tips, or other compensation for the quarter. In box 2, you'll provide the total employee wages, tips, and other compensation for the quarter. In box 3, you'll add the federal income tax you withheld from wages for the quarter.

You'll fill out the next section if your employees' wages are subject to Social Security or Medicare taxes. This is broken up into subcategories for taxable Social Security wages, qualified sick leave, qualified family leave, Social Security tips, Medicare wages and tips, and any wages subject to additional Medicare tax withholding. You'll use the equations listed for each to determine the amount in column 2. The sum of column 2 will go in box 5e.

In box 6, you'll total boxes 3, 5e, and 5f to get your total taxes before adjustments. You'll round this number in box 7 to take care of any fractions of cents. Now, in boxes 8 and 9, you'll make any adjustments to the total for sick pay, tips, and group-term life insurance.

If you're eligible for the qualified small business payroll tax credit for increasing research activities, you'll fill out Form 8974 and attach it to this form. Enter the total from that form in box 11. Organizations can claim up to $500,000 in credits for increasing research activities thanks to the Inflation Reduction Act of 2022.

In box 12, enter your total taxes after adjustments and any nonrefundable credits (such as for qualified sick and family leave taken). For the 2023 version or earlier, this is line 11d. Subtract line 11 from line 10 and enter that amount in line 12 to get your total taxes after adjustments and credits. If you’re using the 2023 version or earlier, subtract line 11g.

In box 13, you'll enter the total deposits you've made for the quarter, including any overpayments from previous quarters. If you’re using the version for 2023 or earlier, you’ll total any refundable credits in boxes 13c and 13e. If line 12 is larger than line 13, enter the difference in line 14. This is your balance due to the IRS. If line 13 is larger than line 12, enter the difference in line 15. This is how much you've overpaid on taxes. You can apply this to your next quarterly return or request a refund from the IRS.

Complete Part 2

In Part 2, you'll let the IRS know which deposit schedule your organization uses for income taxes. The IRS offers a few ways to deposit employee and employer taxes. First is a monthly deposit schedule.

According to IRS Publication 15, organizations are monthly depositors if the total taxes on Form 941 for line 12 for the last four quarters were $50,000 or less. Monthly depositors make payments by the 15th of the month following the end of the quarter (for example, deposits are due April 15 for first-quarter taxes).

If your organization is new and you had no tax liability for previous quarters, your lookback period is considered $0, which means you're likely a monthly depositor.

Your organization might be a semiweekly schedule depositor if the total taxes owed on line 12 during the previous four quarters was more than $50,000. Semiweekly depositors make tax payments for wages earned Wednesday through Friday by the following Wednesday and wages earned Saturday through Tuesday by the following Friday.

If your income taxes were less than $2,500 for the current quarter and you didn't incur any $100,000 next-day deposit obligations, you can make a deposit with your Form 941 return.

To finish this section, you'll check the box that applies to you, either monthly, semiweekly, or less than $2,500.

Complete business information in Part 3

In Part 3 of Form 941, you'll provide information about your organization. You can leave any questions that don't apply to you blank.

This section includes questions about whether your business has closed, whether you're a seasonal employer only, and whether you have expenses allocated to qualified health plans for sick leave wages and family leave wages.

Complete Parts 4 and 5

Now that you've made it this far through the form, the hard part is over. All that's left to do is assign an employee's or tax preparer's information for the IRS to contact in case of any problems (if you choose to do so) and sign and date the form.

Completing Form 941-V

If you're making a tax payment with Form 941, you'll also need to file Form 941-V, Payment Voucher. This option is available for organizations with less than $2,500 in tax liability for the quarter or monthly depositors who are making a payment in accordance with the IRS' Accuracy of Deposits Rule.

You must make all other payments electronically through the Electronic Federal Tax Payment System (EFTPS).

How to submit Form 941 to the IRS

Most organizations submit Form 941 through the e-file system. Many vendors, including most tax preparation software and accounting firms, offer this service. If you want to e-file Form 941, you can find a list of authorized e-file vendors on the IRS website⁵.

If you send the form by mail to the IRS, the destination depends on your organization's state.

Conclusion

Filing IRS Form 941 every quarter is essential to ensure your business remains compliant with federal laws. Submitting this quarterly form on time will also help you avoid any penalties associated with late or incorrect filings.

Contact your tax adviser or CPA for assistance with tax deposit schedules and filing Form 941 and other business taxes.

This blog article was originally published on December 14, 2022. It was last updated on January 11, 2024.

1. https://www.ssa.gov/history/1950.html
2. https://www.nerdwallet.com/article/small-business/irs-form-941-instructions
3. https://www.irs.gov/taxtopics/tc758
4. https://www.irs.gov/forms-pubs/about-form-941
5. https://www.irs.gov/e-file-providers/authorized-irs-e-file-providers-for-individuals