What is Form 941? Understanding Employer's Quarterly Federal Tax Returns

Form 941: everything you need to know

As a business owner, you’re probably pretty used to filling out forms by now. Invoices, HR documents, and all those IRS forms: W-4s, W-9s, 1099s, and of course, Form 941.

And since you ended up here, you’re probably looking for a little help on that last one. Which is exactly why we’re here, too—you know, to give it.

In this article, we’ll answer all your burning questions about Form 941, including:

  • What is Form 941?
  • Who has to file Form 941?
  • What are the deadlines? 
  • How do you fill out Form 941?
  • How to file Form 941 and make quarterly tax payments to the IRS
  • When does the IRS update Form 941?
  • What is Form 940 Schedule B?
  • How do you avoid Form 941 penalties?

What is Form 941?

Form 941 is a document the IRS requires employers to file quarterly to report the amount of income tax withholding and Federal Insurance Contributions Act (FICA) tax owed by an employer.

Let’s break this down a bit. Using Form 941, a business will report how much an employee makes (their income), as well as that employee’s portion of FICA over the quarter. Because these taxes are divided between the employee and employer, Form 941 includes the reporting of the employer’s own share of those Social Security and Medicare taxes, too.

Who has to file Form 941?

Are you a business owner with one or more W-2 employees? If you answered yes, then you’re likely to fall in the category of “needs to file IRS Form 941.” But let’s double check. If you:

  • Paid wages to a W-2 employee (Note: not a contractor) AND
  • Owe more than $1,000 in withholding and FICA taxes annually
  • Owe less than $1,000 in withholding and FICA taxes annually but do not have written permission from the IRS to file Form 944 instead
  • Did not file a final return for the previous quarter, even if you have nothing to report

If you answered yes to the above, you’re required to file Form 941.

Now let’s talk about the exceptions. Some businesses, like those who hire household employees (nannies, cooks, etc.) or farmworkers do not need to file Form 941. But they’re not off the hook—they just have different forms to fill out and submit to the government.

Another exception?

Seasonal businesses, like a holiday market or a summer camp. These businesses are only required to submit Form 941 for the quarters in which you actually paid wages. But remember to mark yourself as a seasonal business on the Form 941. This ensures that the IRS doesn’t expect returns for all quarters and penalizes you for not filing.

So, if you ran a summer camp for toddlers and employed two staff, first: applaud yourself. Toddlers are maniacs. Second, make sure you’re filling out Form 941 for the time you’ve started paying your employees. In this scenario, let’s say they started midway through July. You’ll fill out Form 941 for Quarter 3 (July to September). Pro tip? Follow the instructions for line 18a on Form 941 to remain compliant.

What happens if you aren’t considered seasonal or haven’t marked your business as closed? Well, it’s filing time. If this is the case for your business, you must file Form 941 quarterly, even if you have not paid wages. Even in the case of nil wages, the IRS expects a return and might apply a late filing penalty if you do not file.

Expecting your withholding and FICA tax liability for the year to fall below $1,000? Simply contact the IRS to get permission to file Form 944 annually instead.

What are the deadlines for filing Form 941?

​​IRS Form 941 is a quarterly filing. This means the IRS requires employers to complete and file it four times a year. And don’t forget about actually making those quarterly tax payments that come along with it. (Hey, don’t blame us. We’re just the messenger.)

Here are key filing dates for Form 941 that apply to the vast majority of small businesses:

  • April 30 (for Quarter 1—January through March)
  • July 31 (for Quarter 2—April through June)
  • October 31 (for Quarter 3—July through September)
  • January 31 of the next year (for Quarter 4 - October through December)

Before you jump to the how-to, keep in mind that one of the above due dates falls on a holiday or a weekend, you’ve got until the next business day to file. Oh, and want some extra time to send in your next form? Pay your employment tax deposits in full and on time for the full quarter and get an extra 10 business days to file.

How to fill out Form 941

Form 941 consists of three pages and five parts. At the end of the form, there’s a payment voucher. This is to be used if you’re sending your form in via mail with a payment.

Here’s how to get file Form 941:  

Prepare your paperwork

Staying organized is key for many aspects of running a business. It’s especially helpful when you’ve got employees and Form 941 to fill out. You’ll need key information, which we’ll review below, so having it all in one place is a good spot to start. 

Enter your business information

Form 941 requires you to know exact numbers, like how much tax you’ve remitted on behalf of your staff over the past quarter. To get this number, as well as provide the other necessary details, you’ll need the following:

  • Your business information: this includes your address and Employer Identification Number (EIN)
  • Employee count for the quarter
  • Salaries or wages paid for the quarter
  • Quarterly amounts of Taxable Social Security and Medicare wages
  • Quarterly amounts of federal income taxes, Social Security and Medicare taxes that were withheld from your employees’ wages
  • Quarterly employment tax deposits that were made

Sound like too much to keep track of each quarter? It doesn't have to be. Accounting and payroll software can help you keep track of this type of info, making Form 941 as easy as 1-2-3.

Complete Part 1 of Form 941

Part 1 of Form 941 consists of 15 different lines, and is the most time consuming part of the form. So, the good news? Once you get through this part, it’s pretty much smooth sailing!

To kick off our review of Part 1, let’s start with Lines 1-4. These ones require the info you’ll get from your accounting or payroll. Tip: if you have software that helps with this task, Lines 1-4 will become a whole lot easier! Here’s how they’re broken down:

  • Line 1 asks how many employees you paid in the quarter.
  • Line 2 asks for the total amount of wages, including tips and other types of compensation that was paid.
  • Line 3 asks about the federal income tax that was withheld.
  • Line 4 should be checked off if the wages and compensation that were paid to employees is not subject to Social Security and Medicare tax. This line actually doesn’t apply to most businesses in the US, so you’re likely to leave it blank.

Now for the more complicated part: Lines 5a to 5d. This is where you’ll calculate taxable Social Security and Medicare wages. Because of the many decimals you’ll see here, this section might feel like a blast from math classes past. But don’t worry: they’re just there to indicate the percentage of wages and compensation, like tips, that are deducted for Social Security and Medicare tax.

The form will guide you through this, pointing out the math you’ve got to do for each section. For example: if you have an employee who made $10,000 in the last quarter, plus $2,000 in tips, the math could be broken down like this:

  • Line 5a (Taxable social security wages): $10,000 x 0.124 = $1,240
  • Line 5b (Taxable social security tips): $2,000 x 0.124 = $248
  • Line 5c (Taxable Medicare wages and tips): $12,000 x 0.029 = $248
  • Line 5d: This is left blank unless your employee made more than $200,000 in the year (not quarter).

After you’ve gotten through this part, you’ll then add Column 2 (the totals) to “total line” which is line 5e. Then, on line 6, add lines 3, 5e and, if applicable, 5f. This will calculate your total taxes before adjustments. Fill in that total.

Below are the other lines you’ll need to complete. They include:

  • Lines 7-9: Used for adjustments to report things like sick pay, tips, and benefits like group term life insurance.
  • Line 10: This is for total taxes after adjustments. To find this number, add the amounts in LInes 6 to 9.
  • Lines 11a-11g: Working in technology, medicine, science, or a related field? If so, and you can claim payroll tax credits for research activities, you’ll fill out lines 11a to 11g and then attach IRS Form 8974.
  • Line 12: A bit more math. Subtract Line 11g from Line 10. This will give you your total taxes after adjustments and credits.
  • Lines 13a-13i and Line 14: Add up all of your total deposits and refundable advances. If your liability is more than the deposits you’ve already paid, then the difference will be indicated on Line 14 as your balance due.
  • Line 15: Time for some good news. If your employment tax liability is less than the deposits you’ve already made, this is an overpayment and gets recorded on Line 15. You’ll have the option to receive a refund check or you can apply to overpayment as a credit for your next tax return.
Part 1 of Form 941

Complete Part 2 of Form 941

This section of Form 941 is for your quarter’s deposit schedule and tax liability. In Part 2, you’ll record whether you deposit on a monthly or semiweekly schedule. For the monthly depositor, you’ll fill in Month 1, Month 2, and Month 3 boxes. The total on of these three boxes has to equal Line 12 on Part 1.

For semiweekly depositors—those with more than $50,000 for tax liability for the quarter—it’s time to fill out Form 941 Schedule B and attach it with this form. This form gives a day-by-day breakdown of your tax liability of the quarter.

Part 2 of Form 941

Complete Parts 3 and 4 of Form 941

Is your business closed? Have you stopped paying wages? Or are you a seasonal employer? These are the questions you’ll be asked (and required to answer) in Part 3. This section is also for reporting things like your health plan and wages. 

Part 4 is to record if you’ve authorized what’s called a “third-party designee” to speak on your behalf to the IRS. This could be your tax advisor or accountant. It basically means that you’ve agreed to let them do the talking, and share any key information that pertains to the quarter’s return. If you choose this route, you’ll need to give their phone number and name.

Part 3 of Form 941

Review Form 941 and complete Part 5

Ready to finish and sign the last section, Part 5? Take one extra look at all of your information, or ask your tax advisor or CPA to do that. When you (or they) have confirmed that everything is accurate, sign and date Part 5. If you have a paid preparer, like your CPA, to fill out the form, then they will complete the section called “Paid Preparer Use Only.”

Part 5 of Form 941

How to file Form 941 and make quarterly tax payments to the IRS

When it comes to submitting Form 941 and making your quarterly tax payments, you’ve got options. These include e-filing and paying online, mailing in your forms and payment, working with an accountant to do it all for you, or any combination of the above. 

E-file and pay online

Like speed and accuracy? E-filing and paying online might be the route for you.

To file Form 941 online, you’ll need to choose either tax software or to work with an authorized e-file tax professional. You can find a list of IRS-approved software here and authorized e-file providers here.

To pay your quarterly Form 941 tax balance and make your monthly or semi-weekly deposits online, you’ll use the Electronic Federal Tax Payment System (EFTPS).

Working with a tax software or professional? The IRS recommends you make your payments via Electronic Funds Withdrawal (or EFW). With this option, you can e-file and authorize payment in one step. 🎉

Mail in your form and payment

While the IRS prefers and recommends online filing, small businesses also have the option of mailing in Form 941 along with corresponding tax payments.

To mail in your form and payment, print both Form 941 and Form 941-V, the payment voucher. Mail these, along with your payment, to the address listed for your state. You can find the correct mailing address on page 6 of the Instructions for Form 941.

Work with an accountant to file for you

Your last option for filing Form 941 and any outstanding payments or deposits is to work with an accountant or other tax professional who can file both the form and payment for you. Typically, this is done via the Electronic Funds Withdrawal (EFW) system we mentioned above.

When does the IRS update Form 941?

Typically, the IRS updates the Form 941 annually. However, depending on what’s happening in the country, the form can be updated multiple times in a year.

Take the COVID pandemic, for instance. At the start of the pandemic, different supports like the Families First Coronavirus Relief Act (FFCRA), were signed and put into effect in March 2020 to provide temporary tax relief. More supports were then added as the pandemic went on.

What is a Form 941 Schedule B?

In addition to the different parts and lines of Form 941, there’s also a Schedule B.

Form 941 Schedule B is a type of tax form that’s used to report the tax liability for semi-weekly pay schedules. So, when employers withhold federal income taxes and payroll taxes from their staff’s pay, the totals from the quarter will be reported on Form 941.

Still have questions? We’ve got the answers. Let’s take a closer look 👀

What’s a semiweekly schedule depositor?

You may have heard of this term and wondered what it is and how to use it. Here’s the gist: the IRS uses two schedules—monthly and semiweekly. These schedules are based on your wage payment dates (ie. employee paydays) and indicate how many days you have after the payday to deposit your withheld income and FICA taxes. At a high level:

  • Monthly: tax liabilities for the entire month are due on the 15th of the following month
  • Semiweekly: tax liabilities for each payday are due the following week, with the specific due date dependent on what day of the week the payday was on
    • If payday was Wednesday, Thursday, or Friday, the taxes are due on the following Wednesday.
    • If payday was Saturday, Sunday, Monday, or Tuesday, the taxes are due on the following Friday.

For more information on the schedules, you can reference Section 11 of the Employer’s Tax Guide

How do I know if I am a semiweekly depositor?

You’re a semiweekly depositor if one of the below relates to you:

  • Your reported more than $50,000 tax liability (listed on Form 941, Line 12) during the lookback period, or
  • You’ve accumulated a tax liability of more than $100,000 or more on any given day in the current or prior calendar year

If this applies to you (even if you were previously a monthly schedule depositor!), the IRS will move you to the semiweekly schedule. Then, you’ll be expected to follow the new cadence for the rest of the current calendar year and the next calendar year. 

What’s the lookback period?

A lookback period is a specific time frame that employers use to figure out their deposit schedule for withheld taxes, including FICA tax and federal income tax. This period begins July 1 of the second preceding year and ends on June 30 of the prior year.

For example: in the 2023 tax year, the lookback period would be July 1, 2021 through to June 30, 2022. If you had more than $50,000 in tax liability during this time, you’re considered a semiweekly depositor for 2021, and are therefore required to fill out and submit Schedule B alongside your quarterly Form 941s.

How to avoid Form 941 penalties

It’s a fact: whether you’re a sports player or a business owner, no one likes penalties. Especially the kind that has you paying fees.

So, if you’re late to a Form 941, expect the above. Your penalty may be 5% of the tax due for each month (or the part of the month) that’s late. This penalty caps out at 25%.

Then, you’ve got your other penalties. These apply if you’re making late payments or paying less than you actually owe, and can be 2% to 15% of your underpayment.

Remember: when all is added up and the tax year is done, the total amounts that you’ve reported for withholdings from employee wages must be the same as amounts you report on the W-2 forms you distribute to your staff, plus the Form W-3 you file with the government.

And if something doesn’t add up? Well, the IRS may come a-knockin’. 

Moving ahead with Form 941

Form 941 (and its five parts and 15 lines) is used by business owners and employers to report income taxes, Social Security tax, or the Medicare tax that’s withheld from an employee’s pay.

It has to be filed quarterly, on time, and accurately—especially if you want to avoid penalties! To do this, organization is key. Like we mentioned above, you need to know business info, like your address and EIN, and also employee info: counts, salaries, tips, sick time, taxes that were withheld, and quarterly employment tax deposits that were made.

Which is why payroll software can help. Imagine making this all automated, accurate, and compliant? And being able to start any time, not just in the next quarter?

Welcome to Wave. Our payroll software does all of the above, so you don’t have to. Ready to make Form 941 a breeze?