Form 941: the quarterly payroll return

What does Form 941 report?

• Number of employees and wages paid in the quarter.
• Federal income tax withheld from employees.
• Social Security and Medicare wages and tax, both shares, and Additional Medicare Tax withheld.
• Adjustments, such as for sick pay or fractions of cents.
• Total deposits for the quarter and any balance due or overpayment.

See payroll taxes explained.

When is it due?

If every deposit for the quarter was made on time and in full, you have 10 more days to file.

How do deposits relate to the return?

The tax is not paid with the 941. It is deposited during the quarter, monthly or semiweekly according to the schedule the IRS assigns from your past liability. Semiweekly depositors attach Schedule B showing liability by day. Employers whose liability for the quarter is under $2,500 can generally pay with the return instead. See how to run payroll and how to pay the IRS.

The schedules are explained in payroll tax deposits: monthly vs semi-weekly.

How do you complete it accurately?

1. Run your payroll reports for the quarter

   Wages, withholding and deposits.

2. Check deposits against liability

   Each month or each payday.

3. Complete the form or let payroll software do it

   Including Schedule B if you deposit semiweekly.

4. File electronically

   Through payroll software or a provider.

5. Reconcile at year end

   The four 941s should agree with the totals on Forms W-2 and W-3.

What if you paid no wages in a quarter?

You still file Form 941 for that quarter, showing zero, unless you have told the IRS you are a seasonal employer or filed a final return because you stopped paying wages altogether. On a final return, tick the box and give the date of the last payment. Missing a quarter, even with nothing due, leads to IRS notices.

Which records should you keep?

Payroll registers, each employee's Form W-4, deposit confirmations, copies of each 941 and any 941-X, for at least four years after the tax was due or paid. See how long to keep business records.

What is Form 944?

An annual version for very small employers, whose annual Social Security, Medicare and withheld income tax is $1,000 or less. You file it only if the IRS has told you to; otherwise you file Form 941.

How do you reconcile 941s to the W-2s?

At year end, add the four 941s together. Total wages, federal income tax withheld, and Social Security and Medicare wages and tax should equal the totals on Form W-3. Differences usually come from fringe benefits, third-party sick pay or corrections made in one place and not the other. Fix them before filing the W-2s, using Form 941-X if a quarter was wrong. See Forms W-2 and W-3.

What are the penalties?

Late filing and late payment penalties apply to the return. Late deposits carry failure-to-deposit penalties of 2% to 15%, depending on how late. Unpaid withheld taxes can also make the people responsible personally liable. See first-time penalty abatement.

Unpaid withheld taxes can become personal. See the trust fund recovery penalty.

How do you correct a filed 941?

File Form 941-X for that quarter, explaining each correction. Do not file a second 941.

This guide is general information. It is not tax or legal advice for your situation.