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Using Form 941 to Pay Quarterly Payroll Taxes

David Gargaro
David Gargaro

This guide explains Form 941, which employers need to fill out for tax withholdings from employee paychecks during payroll.

Anyone who runs a business and hires employees takes on new responsibilities for managing their staff. These include running payroll, paying payroll taxes, and filing several different payroll tax forms to the IRS. One of those is Form 941, which is required for paying quarterly payroll taxes. It's important to know how to fill out this tax form properly and to file it on time to avoid penalties and other problems.

What is IRS Form 941?

IRS Form 941 is the Employer's Quarterly Federal Tax Return. Anyone who operates a business and has employees is required to file this form when paying their employees quarterly payroll taxes.

As an employer, you must use Form 941 to report the total amount of taxes you withheld from employees' paychecks during the quarter. You must submit this form four times per year by the scheduled filing dates to avoid penalties.

Federal income and payroll tax withholding

Employers must withhold federal income tax and other payroll taxes from their employees' paychecks and remit those taxes to the IRS on a quarterly basis. The amount you need to withhold for federal income tax depends on the information in your employees' W-4 forms. The amounts in IRS Form 941 are calculated according to each employee's Medicare and Social Security wages. As an employer, you must also calculate your portion of FICA taxes.

There are exceptions that enable businesses to file annually instead of quarterly. For example, if your annual payroll tax and withholding liabilities are less than $1,000, you may request approval from the IRS to instead file Form 944, the annual version of Form 941. You must contact the IRS by phone or mail to get permission to submit Form 944 instead of Form 941.

TipTip: You can use one of these top online payroll services to keep your business up to date and compliant with all tax documentation requirements and deadlines.

Coronavirus tax credit deferrals 

Because of the pandemic, the federal government has provided businesses with tax credits to help them defer the payment of certain employment taxes. There are two of these tax credits that businesses can apply for:

  • The Employee Retention Credit (ERC) encourages businesses to continue paying employees if COVID-19 has affected their business. This tax credit is available until Dec. 31, 2021.
  • The American Rescue Plan tax credits help employers that must provide employees with sick leave or family leave if they cannot work due to COVID-19. This tax credit is available for paid sick or family leave that employees took between April 1 and Sept. 30, 2021.

Employers can use Form 941 (which changed in the second quarter of 2020) to report the deferral of employment taxes.

Who should file a Form 941?

Anyone who pays employees a wage must file a Form 941 on a quarterly basis. Employees are not required to file this form and do not receive a copy. The employer is required to file this form even if they have no employees working for the business during a specific quarter. For example, many businesses have been forced to shut down due to government-imposed lockdowns during the pandemic, but they are still required to file Form 941 on a quarterly basis.

These are some types of employers that are exempt from the legal requirement to file Form 941:

  • Seasonal employers
  • Employers of household staff
  • Employers of agricultural staff

How to fill out Form 941

Form 941 consists of two pages and five parts. It also comes with a payment voucher, which you must submit with the form when you send a payment by mail.

1. Prepare information before filling out Form 941.

Form 941 requires a lot of information. To make the process easier, collect all the necessary information before filling out the form. It is more efficient to use a payroll service or accounting software to pull the numbers needed to fill out Form 941 (as compared to filling out the form manually while processing payroll on your own). You can pull information on tax receipts from your payment history in the Electronic Federal Tax Payment System or your business bank account statements.

This is some of the information required to fill out Form 941:         

  • Employer identification number (EIN)
  • Basic business information (e.g., business name, address, contact information)
  • Total number of employees working at the business
  • Total wages paid during the quarter in which you are filing
  • Total amount of Social Security and Medicare wages for the quarter
  • Total amount of federal income tax, Social Security tax, and Medicare tax withheld from all employees' wages during this quarter
  • Any deposits already made on employment taxes during this quarter (most employers must make monthly or semiweekly employment tax deposits)

2. Fill out Part 1.

Fill in the EIN and other basic business information at the top of Form 941.

Part 1 takes up most of the first page and requires the majority of financial information and calculations. You can pull most of this information from your accounting or payroll software to fill in the necessary fields. Complete Part 1 with the following information for this quarter:

  • Total number of employees you have paid
  • Total compensation (including wages and tips) paid
  • Federal income tax withheld
  • Taxable Social Security and Medicare wages
  • Total taxes owed before adjustments
  • Adjustments to report for sick pay, tips and group-term life insurance 
  • Payroll tax credits
  • Tax deposits already made
  • Balance owed or overpayment due

3. Calculate the tax payment you owe to the IRS.

To calculate the amount of taxes to send to the IRS in addition to federal income tax, the payment must show the following:

  • Social security insurance: 2% of each employee's wages, up to a maximum of $142,800 for 2021
  • Medicare: 45% of all taxable wages (with an additional 0.9% Medicare tax for employees who earn more than $200,000 for the year)

As an employer, you must provide the IRS with an additional payment that equals all Medicare and Social Security taxes withheld. As of 2015, the employer must withhold additional Medicare tax from wages that exceeded $200,000 during the year.

4. Fill out Part 2.

Part 2 requires you to fill in your EIN and business information again. You must then indicate your deposit schedule (monthly or semiweekly) and your tax liability for this quarter. Semiweekly depositors who owe more than $50,000 in tax liability for the quarter must also fill in Schedule B.

5. Fill out Part 3 (if necessary).

You must fill out Part 3 if your business has closed, you have stopped paying wages, or you are a seasonal employer who does not file quarterly. If none of these criteria apply, you can leave it blank.

6. Confirm whether you hired a professional to represent you.

Check "yes" in Part 4 if you have authorized a third party (such as a tax professional) to speak with the IRS on your behalf, and provide their information if so. Otherwise, check "no" in this section.

7. Sign and complete Form 941.

Review all the information you've entered into Form 941 to make sure it is correct. Make sure your tax professional does the same. Once you have verified all the information, sign and date Part 5 of the form.

When is Form 941 due?

Employers must file a separate Form 941 for each quarter. The IRS sets four mandatory filing deadlines each year:

  • April 30 for Q1
  • July 31 for Q2
  • Oct. 31 for Q3
  • Jan. 31 of the following year for Q4

If the due date is a holiday or weekend, you can use the adjusted due date, which will be the next business day. For example, if April 30 falls on a Saturday, the due date for an April 30 payment would be Monday, May 2.

The easiest way to remember these dates is to note that filing deadlines always fall on the last day of the month at the end of each quarter. This gives you one month to prepare Form 941 before submission to the IRS.

You have 10 more days after the due date to file Form 941 for the quarter, provided you made your complete payroll tax deposits for the quarter on time. These are the filing deadlines to meet the criteria:

  • May 10 for the first quarter ending March 31
  • Aug. 10 for the second quarter ending June 30
  • Nov. 10 for the third quarter ending Sept. 30
  • Feb. 10 for the fourth quarter ending Dec. 31

TipTip: Use a free payroll service app that can keep tabs on deadlines and manage them for you so you can focus on your business.

How to avoid penalties

If you don't file Form 941 by the deadline, you may incur a penalty of 5% of the tax due with that tax return for each month or part of a month when the return is late. The maximum penalty for a later return is 25% of the tax due. The IRS can impose a separate penalty for making late tax payments or paying less than you owe. The IRS will impose a fine ranging from 2% to 15% of the underpayment amount, which will depend on how many days past the deadline the IRS receives the correct amount.

Bottom LineBottom line: At the end of each year, the numbers reported in Form 941 must match the W-2 forms given to employees and the W-3 forms sent to the government.

How do you file Form 941?

You can use the free federal e-filing system to submit Form 941 electronically. You can use tax preparation software or work with a tax professional to pay any tax balance electronically. Visit the IRS website to determine where to file taxes for Form 941 and what mailing address to use.

Image Credit: AndreyPopov / Getty Images
David Gargaro
David Gargaro
business.com Contributing Writer
David Gargaro is a content writer and copy editor with more than 20 years of experience in multiple industries, including publishing, advertising, marketing, finance, and small business. He has written on B2B-focused topics covering business technology, sales, marketing, and insurance. David has a Bachelor of Arts degree in English and Actuarial Science from the University of Toronto. He served as the managing editor of a small publishing company, and self-published a book called How to Run Your Company… Into the Ground.