How to Fill Out IRS Form 941
Hi everyone, I'm Priyanka Prakash, senior staff writer at Fundera.
Today I'll show you how to fill out IRS Form 941.
Form 941 is a form that businesses file quarterly to report withheld income taxes from their
employees’ wages, as well as the employer and employees share of Social Security and
Medicare taxes, which are together called FICA taxes.
In general, if you'll be paying wages of more than $4,000 per year, giving you a tax liability
of more than $1,000 per year, then you'll need to submit Form 941 on a quarterly basis.
Let's get started with the form.
To begin, indicate the quarter for which you're filling the form out.
Form 941 is due on the last day of the month following the period for which you're filing.
For example, you’d file the form by April 30 to cover wages paid in January, February,
and March.
The other deadlines are July 31, October 31, and January 31.
In this case, I'm going to choose option 1.
I'm filing by April 30 to cover wages paid in January, February, and March.
Then, you'll type in or right in your hand filling the form your business’s EIN number,
name and address.
I'm going to provide this information for a sample business.
Since this is a US-based business, I'm going to leave the bottom three boxes there blank.
Okay, moving on to Part 1, which is the most important part of the form because this is
where you'll be providing compensation and tax information.
Remember that you should only be providing numbers for the quarter that the filing covers.
For instance, if you're filling out this form for the April 30 deadline, you would only
provide wage and withholding information for January February and March.
So, if you hired a new employee and started paying them in April, that individual’s
information should not appear on this form for that filing.
It's easy to break down wage and withholding information by quarter if you use accounting
software or payroll software.
Start with the number of employees in line 1.
These could be full time, part time, or seasonal employees—anyone who received wages during
the quarter, with the exception of independent contractors, farm workers, and household employees.
You should also exclude seasonal workers for whom you did not pay any wages this quarter.
In our example, we will pretend that we have three employees for ABC Bakery LLC.
In line 2, enter the gross amount of wages, tips, and other types of compensation that
those employees received.
Compensation can include things like bonuses, fringe benefits, and employee expense reimbursements.
In this example, let's just assume for simplicity sake that each of our three employees received
$50,000 in total compensation, giving us a grand total of $150,000 for the three employees.
In line 3, you'll note the amount of federal income taxes that you've withheld from your
employees this quarter.
Now, this amount will obviously depend on each employee’s federal tax bracket, the
choices they made on their W-4 withholding form, as well as if they're using pre-tax
money for any purpose like a retirement account.
Again, if you use payroll software, that software should easily show you how much federal income
taxes you collectively withheld for the quarter.
In this example, we'll just say that ABC Bakery LLC withheld $30,000 dollars in total from
all employees.
In lines 5a to 5d, note down the total wages that were subject to Social Security and Medicare
taxes.
Now, if none of the wages were subject to Social Security or Medicare tax, you check
off this box here next to line 4 and skip down to line 6.
But in most cases, most or all of the wages that you've paid will be subject to Social
Security and Medicare taxes.
Under current law, the first $132,900 of an employee's wages are subject to Social Security
tax.
But this wage limit changes, typically from year to year so make sure you know the current
limit as you go to fill out the form.
If any employee’s wages exceed that limit, the amount that you note in column 1, line
5a will be smaller than the amount noted in line 2.
All wages are subject to Medicare taxes without limit, and employees earning above $200,000
per year pay a Medicare surtax.
In this example, we’ll say that all of the wages that ABC Bakery paid are subject to
Social Security Taxes, so this number is going to match up with what's in line 2.
ABC Bakery did not pay any tips to employees.
They are a tip-free business, so I'm going to leave line 5b blank.
And in line 5c, I'm going to put down the $150,000 again because there's no limit on
the wages that are subject to Medicare tax.
None of ABC bakeries employees earned more than $200,000 for the year, so I'm gonna leave
box 5d blank as well.
Now, Social Security, Medicare, and Medicare surtax are three different tax rates, which
the IRS has conveniently provided on the form here for you, so you simply have to do the
multiplication.
If I multiply $150,000 by 0.124, I get $18,600.
And if I multiply $150,000 by 0.029, I get $4,350.
Okay, and now I add up everything in column 2, and put it down in box 5e.
That equals $22,950.
You would skip line 5f unless the IRS has sent you a section 3121(q) notice about unreported
or underreported tips.
In line 6, you'll need to add up lines 3, 5e, and 5f (if there's anything in the line
5f box).
So adding those up, I get $52,950.
Line 7 to 9 are for positive or negative adjustments that you might have to make to the amount
of taxes that you owe.
Adjustments that reduce the amount of taxes should be indicated with a minus sign or parentheses.
Fractions of cents is sometimes needed as an adjustment because of rounding in your
payroll system.
The employee’s share of taxes might actually be higher or lower than the amounts you've
withheld.
You might have to reduce the employee’s share of taxes if you have an insurance company,
or other third party which paid sick leave benefits and withheld the taxes from employees’
wages.
And if you haven't finished collecting taxes on employee tips or Group Term Life Insurance,
that requires a negative adjustment as well.
In our example, let's just make a $1.30 positive adjustment due to rounding in our payroll
system.
If I account for that adjustment and add it to line 6, I'm going to get $52,951.30.
Line 11 actually lets businesses offset their FICA taxes by claiming a credit for certain
kinds of research activities.
If this applies to you, and you can find out if it does by reading the instructions on
Form 8974, you would simply attach the filled out Form 8974 to this form, note down the
amount of the credit you're claiming, and in line 12, subtract the credit from your
tax due.
In this case, I'm going to leave line 11 blanks since ABC Bakery is not claiming a research
credits.
And line 12 is going to be identical to line 10.
Line 13 has to do with tax deposits.
In addition to filing Form 941 quarterly, you'll also need to deposit withheld income
taxes and FICA taxes on an ongoing basis.
The deposit schedule is either monthly or semiweekly depending on the size of your business's
tax liability.
Indicate here how much you deposited for the quarter.
Ideally, this should match up with line 12, but you might have an underpayment or overpayment.
If you have an underpayment, you pay the difference either along with this form or through that
Electronic Federal Tax Payment System (EFTPS), and if you made an overpayment, the IRS will
either send you a check as your refund or apply the overpayment to your next return.
These other forms that you see here are amended returns.
If you make a mistake on your Form 941, you have to file 941-X, the amended version of
the return.
In this example, I'm going to say that ABC Bakery had a $10 overpayment.
So, I would indicate the amount of the overpayment here in line 15.
And in this case, since it's such a small amount, ABC Bakery is just choosing to have
the difference applied to their next return.
Okay, on to Part 2, but first make sure you note down your business name and EIN number
at the top.
This is just to ensure that the IRS does not lose any of your paperwork.
In Part 2, you'll provide information to the IRS about your tax deposit schedule.
As I said before, most employers must deposit withheld income tax and the employee and employer’s
share of Social Security and Medicare taxes.
You'll either follow a monthly or semiweekly deposit schedule, depending on the amount
of taxes that you pay during a one-year look back period, which is July 1 through June
30.
If your taxes during that period are $50,000 or less, than you’re a monthly depositor.
If your taxes are more than $50,000 during that period, you're a semiweekly depositor.
In this example, we're going to assume that ABC Bakery is on a semi weekly schedule, and
we'll check off the bottom box.
If you're on a monthly schedule, you would check off this middle box here and break down
your liability for each month of the quarter and provide the total.
That total must match the total that was in line 12 of Part 1, and if it doesn't match
up, go back and check your math because you probably made an error somewhere.
If you're a semiweekly schedule depositor, you'll need to complete Schedule B for Form
941 and attach it to this form.
Part 3 only applies to you if you're closing down your business, or if you have seasonal
employees and don't file a return for every quarter of the year because you don't employ
people during every quarter of the year.
I'm going to leave both of those blank since neither of those apply to ABC Bakery.
In Part 4, you need to indicate if you'd like to allow your tax preparer, lawyer, or another
third party to discuss your form with the IRS.
In this example, I'm going to assume that the CEO of ABC Bakery personally filled out
this form, so there's no need to allow another person to discuss the form with the IRS.
But in many cases, you might want to allow your tax preparer or a lawyer to discuss this
form on your behalf.
Lastly, in Part 5, you'll need to provide your name, your title, your phone number,
and date and sign the form.
You can only sign and date after you print the form, so I'm going to leave those blank
for now and just fill out the other information.
We'll say Betty Business is filling out this form for ABC Bakery, and she is the CEO of
the business, and I'll provide her phone number.
This last box is only relevant if you hired somebody to fill out your form, and if that's
the case, the paid preparer will need to sign and provide their information here.
The last page of Form 941 if you scroll down to the bottom is a payment voucher.
This is included in case you're sending in payment of taxes along with your Form 941.
Not all businesses are allowed to send in payment with form 941.
But, in some cases, if your tax liability is pretty low, you can send in payment otherwise,
most businesses make payments and deposits with the electronic tax payment system.
And that's it for Form 941 everyone.
Thank you for watching.
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