Form 941: How employers report quarterly federal taxes

Editor’s note: Form 941 is a tax form used by employers to report quarterly tax withholding amounts for employer payments and FICA taxes. Read on to learn who needs to file, what it’s used for, how to file it, and why it matters.

The U.S. tax system requires all of us to “pay taxes as you go.” As a small business owner, part of that responsibility rests on your shoulders where your employees’ compensation is concerned.  

In other words—as a small business owner, you need to withhold payroll taxes and send them to the IRS (and state treasury agencies) throughout the year. Here’s where IRS Form 941 enters the picture – this form is used to report tax withholding amounts on a quarterly basis. This form is critical for reporting purposes and to make sure your business is staying on top of its tax withholding amounts for your employees.

Who files IRS Form 941?

Not all businesses need to file IRS Form 941. But all business entities could be subject to filing the form.

You must file Form 941 if you pay wages subject to federal income tax withholding or Social Security and Medicare taxes.

Generally, the employer’s annual federal tax return (Form 944) is required to be filed even if you are not required to file Form 941.

You don’t have to file Form 941 if you:

• Do not have any employees
• Received notification to file Form 944 (if employment taxes are $1,000 or less for the calendar year, the IRS may notify you to file Form 944 instead of Form 941)
• Paid no wages and have no tax liability as a seasonal employer
• Employed household employees
• Paid wages for agricultural labor to farm employees.

Please note, employees do not need to receive a copy of this form.

What is Form 941 used for?

If you are a small business owner, use Form 941 to:

• Report income taxes, Social Security tax, or Medicare tax withheld from employee’s paychecks.
• Report the employer portion of Social Security or Medicare tax.

Long story short, it tells you how much was withheld from your employees’ paychecks on a quarterly basis—plus your FICA contributions.

Form 941 differs from Form 1040-ES. Form 1040-ES is the form you, as an individual who receives income (including income from businesses such as sole proprietorships and S corporation shareholders), generally uses to fill out and pay estimated taxes. So, Form 1040-ES needs to be filed when you do not have an employer withholding these taxes from you.

In contrast, Form 941 is the form that shows the IRS how much tax you, as an employer, withheld from each employee’s paycheck. Therefore it is important, if you once operated, for example, a sole proprietorship and filed Form 1040-ES quarterly, and if you later hire an employee, to file Form 941 and begin to withhold payroll taxes from the employee and deposit withholdings to the IRS.

Coronavirus pandemic note: Form 941 is also used to take the Employee Retention Tax Credit and Sick Leave and Family Leave Tax Credit.

When is the form due?

Form 941 is due four times per year, similar to the frequency your quarterly taxes are due. As a recap, these dates usually fall on:

• April 30 for Quarter 1 (January, February, March)
• July 31 for Quarter 2 (April, May, June)
• October 31 for Quarter 3 (July, August, September)
• January 31 of the following year for Quarter 4 (October, November, December)

If these dates fall on a weekend or holiday, the deadline moves to the next business day.

Why should you file the 941 tax form?

With so many tax forms due, you might wonder why this form needs to be filed. The 941 tax form is important because it allows you to report taxes throughout the year. If you do not file your quarterly federal taxes, you may incur failure-to-file and failure-to-pay penalties.

If amounts are not properly or timely deposited, the IRS can assess a penalty in the amount of two to 15%.

The IRS matches information you report on your four quarterly Forms 941 with Form W-2 amounts totaled on your Form W-3. You should deposit on a monthly or semi-weekly schedule as you make payroll. In some cases you might pay quarterly, but it won’t be equal. Here’s the general rule:

Before the beginning of the calendar year, determine which type of deposit schedule you must use.

• If you reported $50,000 or less in taxes during the lookback period, you’re a monthly schedule depositor.
  • If you reported more than $50,000 of taxes during the lookback period, you’re a semiweekly schedule depositor.

Form 941 instructions

The employer’s quarterly federal tax return has an employer information section and five parts. We’ll outline those for you below—but you can always leave the paperwork to us—it’s why we’re here!  Let our small business tax pros take care of your Form 941, so you can focus on your business.

The top of the 941 has you fill out your:

• Employer identification number
• Name
• Trade name
• Address
• Quarter in which you’re filing

Part 1:

The first section of the 941 calculates and reports the amount of payroll tax you’re liable for. You’ll provide details about employee wages, tips and other compensation. Here’s also where you’ll figure out your total Social Security and Medicare taxes.

Lastly, you’ll figure out if you owe or have a balance due by comparing your total deposits with your tax liability.

Part 2:

This section is the payroll deposit schedule and your tax liability for the quarter.

Parts 3:

This section asks for information about your business.

Part 4:

This section allows you to delegate a third-party to discuss the return with the IRS. So, if you enlist the help of a tax pro at Block Advisors, for instance, you would indicate it there.

Part 5:

This section calls for a signature.

Getting help with Form 941

Have questions about Form 941? Our small business certified tax pros at Block Advisors are ready to help. We’re here all year, so you can count on us each quarter when your 941 form is due. Our tax pros are available to offer advice and keep you and your business on track.

Schedule a time to meet with your tax pro in person, or via phone, video or chat.