W-2, 1099, W-9... The sheer number of tax forms for employers and employees can get complicated.
For companies, corporate taxes can be cripplingly complex. We want to take that complication off your plate, starting with the IRS Form 941 for employers.
Update: Before you know which forms to use, you have to classify your employees correctly first. You can download a free guide here for help.
IRS Form 941: What is it?
Form 941, also known as the Employer’s Quarterly Tax Form, is the company’s way of reporting to the IRS the withholdings from its employees.
As the name implies, it is a quarterly tax form that tells the IRS how much money your company has withheld in federal income tax, social security, and Medicare. The company then has to send those withholdings to the government.
The 940 tax form helps calculate how much money must be sent and when (monthly or semi-weekly.)
There are three exceptions for employers that don’t have to fill the form out.
- Anyone who employs household workers such as butlers, maids, live-in nannies, etc. Instead, they are filed on the schedule H part of the Form 1040.
- Anyone who employs farm employees. A Form 943 should be used instead.
- Anyone who employs seasonal employees. If you hire a lot of people around the holiday season, you only need to complete a 941 Form for the quarters they worked there; partial or complete.
Filling Out the Employer's Quarterly Tax Form
The IRS 941 tax form is broken up into five parts plus a general business information and payment voucher section.
Not every part of the form has to be filled in, but it is important to go through each step to ensure that you don’t miss anything. There are questions that might not pertain to you.
At the very top, employers have to fill in their business information. This includes your employer identification number (EIN), business name, any trade name (other name your business may go by), and the address. There’s also a box specifying what quarter this return is for.
The following is a breakdown, line by line, of the entire 941 form:
- Line 1: The total number of employees that received compensation in the quarter.
- Line 2: This is the total tips, wages, compensation, etc. that was paid to those employees. This also includes any supplemental wages.
- Line 3: The total amount of tax that you have withheld from your employee’s pay check.
- Line 4: If none of the compensation is subject to Medicare or Social Security taxes, check the box and skip lines 5a-5f.
Get the Guide
Learn how to correctly classify seven different types of workers with our simple guide.
Line 5: This is to help calculate the total amount that needs to be sent for Medicare and Social Security. Unlike federal income tax, part of these taxes comes from the employer, so you will not have withheld the total amount from your employees. The lines are:
- 5a: Total wages that are subject to social security wages go into Column 1. This should be the same as Line 2. You then multiply that by the Social Security tax (at time of publish, that was 0.124) and fill that answer into Column 2.
- 5b: This is the total tips that are subject to social security wages. If your company doesn’t do tips, ignore this field.
- 5c: Total wages & tips that are subject to the Medicare tax go into Column 1. This should be the same number as you put in Line 2 and Line 51. You then multiply that by the Medicare tax (at time of publish, that was 0.029) and fill that answer into Column 2.
- 5d: As with 5b, if your company doesn’t do tips, you can skip this.
- 5e: This is the sum of the column 2 answers for 5a, 5b, 5c, and 5d.
- 5f: This is another tip related tax. In essence, if you don’t know what your employees received in tips, you may underpay on your obligation. You don’t owe any taxes until the IRS tells you that you do owe money based on what the employee reported. If your business is not a tip business, ignore this section as well.
- Line 6: This is the sum of Lines 3, 5e, and 5f, which is the total amount of taxes owed before any adjustments.
- Line 7: This is any cent discrepancies due to fractional pennies. In other words, if your employee had a tax liability of $2,315.313, you can’t send 31.3 pennies to the IRS. Therefore, this is where you report any discrepancies. If you paid $6,543.14 and the form says you should have paid $6,543.16, you would put a -.02 in line 7.
- Line 8: If you have a third-party sick pay payer, such as an insurance company, these amounts are subject to taxes. You would need to calculate how much that payment was and put it there.
- Line 9: This line is in connection with 5f if there is any uncollected share of social security and Medicare taxes on tips for employees or if there is uncollected employee share of taxes for group-term life insurance premiums for previous employees.
- Line 10: Total taxes after adjustments. You take Line 6, apply any of the adjustments for Lines 7-9 and put that answer in Line 10.
- Line 11: How much money was paid (reference the next section for when money is due to the government) throughout the quarter.
- Line 12: If you owe money at the end of the quarter, enter that amount here. This is if Line 10 is more than Line 11.
- Line 13: If you paid more than you were supposed to, enter that amount here. This is if Line 11 is more than Line 10. You can then decide if you want to receive a refund on that amount or have it applied to the next quarter’s return.
When are Payments Due?
Unlike corporate quarterly taxes, which only need to be paid after the quarter is over, employee taxes have to be paid either semi-weekly or monthly. Part 2 of the tax form should be filled out depending on when you have to pay. The rules are below.
If your payroll taxes for the previous three months were $50,000 or less, you pay monthly. Therefore, deposits must be made to the IRS by the 15th day of the upcoming month. That means that your payroll deposit for September is due by October 15th.
If your payroll taxes for the previous three months were more than $50,000, you pay semi-weekly. This payment structure is even more strict. If you pay your employees on a Saturday, Sunday, Monday, or Tuesday, the taxes are due by the following Friday. If you pay your employees on a Wednesday, Thursday, or Friday, the taxes are due by the following Wednesday.
But there are still further exceptions. If your company is very small and you only have a payroll obligation of $2,500 or less in a quarter, this money can be sent to the IRS along with the Form 941.
Further, once your business reaches the point where your payroll tax obligations is $100,000 or more, you will have to make next-day deposits. Even if it was just one month you reached that level, you’ll still have to make next-day deposits for the rest of the current year and the entire next year.
Quarterly Tax Form Penalties
In the event that you don’t file a Form 941 on time, it could result in a penalty of 5% of the total tax that would have been due with that return. This 5% can be applied for each month that the return is late. If you continue to not file the return, you will be capped at 25% penalty.
There is an additional penalty if you file the form, but don’t pay the actual tax payments. The IRS can charge anywhere from 2 to 15 percent of the missing or underpaid amount. This is contingent on how many days you are late. If you are a next-day payer, this can quickly add up.
Once the year is up, you’ll want to ensure that the amount you’ve reported on the four employer's quarterly tax forms is equal to the total amounts reported on your employee’s W-2 forms and the W-3 that is sent to the government.
Fortunately for you, it is easy to avoid these penalties by using the Justworks platform. Let Justworks ensure that the correct taxes are withheld, the correct amounts are sent to the IRS, and all the proper forms are sent when they need to be sent. Avoiding compliance fines is one of the many things that makes Justworks work for your team.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.