This article is (hopefully!) a simplified version of the “Instructions for Form 941”. Form 941 is what most employers use to record and pay income tax, social security, and Medicare withholdings. Its not the step by step, line by line version, but will teach “show you the ropes” of Form 941.

Purpose And Filing of Form 941:

If Joe is an employer, Federal law requires that he takes out of his employees’ paychecks (withholds) sums for federal income tax, social security tax, and Medicare tax. Under this withholding system, taxes withheld from Joe’s employees are credited to them when they pay their “tax liabilities”. Of course, Joe has to withhold from himself, to help pay his social security and Medicare taxes.

The IRS warns Joe not to use form 941 to report withholdings on nonpayroll payments including but not limited to pensions, annuities, and gambling winnings. The IRS also says that Joe must file an initial 941, then one each quarter, even if he has no taxes to report, unless he fits one of the exceptions listed below.


Seasonal employers have no need to file form 941 in quarters they have paid no wages.
Employers of solely Household employees don’t usually file form 941.
Employers of farm employees don’t usually file form 941 either.
Agricultural employers file form 943.

Unless Joe fits on of these exceptions, he has to file form 941.

Joe must use form 941 to report these amounts to the IRS:

Wages he has paid.
Tips his employees were given.
Federal income tax he withheld.
All the social security and Medicare taxes he withheld (including his own).
The current quarter’s adjustments to Medicare and social security taxes. These adjustments are for fractions of cents, sick pay, group-term life insurance, and tips.
Advanced EIC payments.
Credit for COBRA premium assistance payments.

Business/Name/Address Changes

If Joe sells or transfers his business, both he and the new owner must file form 941 (two forms, one by Joe, and one by the new owner) for the quarter in which the transfer happened. If two businesses merge, the continuing one must file a return for the quarter in which the change took place, and the other should file a final return. See the *”Instructions for form 941″ to learn about changing forms of business.

If Joe changes his business name or address, he must notify the IRS ASAP. In this event, he must write to the IRS office where his returns are filed, and complete and mail form 8822 (Change of Address) for address changes.

In the event that Joe–or the government–closes his business he must file a final return. There will be other forms Joe has to file is he goes out of business.

When must Joe File Form 941?

Joe must file his first form 941 for the quarter in which he first paid wages that were subjected to social security and medicare taxes; or subject to federal income tax whithholding. He must then file every quarter thereafter (each quarter is three months) even if he has no taxes to report, unless he is filing/has filed his final return, or one of the exceptions apply to him. Joe must file form 941 only ONCE for each quarter, even if he chooses to file it electronically.

Quarterly form 941 is due the last day of the month following the end of the quarter it is to be filed for. Quarters are:

January, February, March.  This quarter ends March 31st, so form 941 is due April 30th.
April, May, June.  This quarter ends June 30th, so form 941 is due July 31st.
July, August, September. This quarter ends September 30th, so form 941 is due October 31st.
October, November, December. This quarter ends December 31st, so form 941 is due  January 31st.

Note: If any of the due dates shown above falls on a Saturday, Sunday, or LEGAL holiday, Joe may file his return on the next business day.

Joe must not procrastinate is filing form 941 and always file it as soon as possible (ASAP). To be considered “on-time”, his form must be post-marked before the due date. He doesn’t want the IRS to charge him penalties and interest. This brings us to…

How Can Joe Avoid Penalties and Interest? He can:

Pay his taxes when they are due.
File his FULLY COMPLETED Form 941 on time.
Report his tax liability (how much he owes) accurately.
Submit good checks for his tax payments.
Supply accurate w-2 forms to his employees.
File form w-3 and Copy A of form w-2 with the SSA (social security administration) accurately and on time.

If the above are followed, there is a very slim chance that the IRS will charge Joe with any penalties concerning Form 941. This is not a complete guide for avoiding penalties on allthings tax-related however.

How Should Joe Complete Form 941?

If Joe happens to have his business information printed on top of his copy of form 941, he should make sure that info is correct. He needs to CAREFULLY review the EIN (employer identification number) the IRS gave him and make sure it is correctly printed (or typed) on the form. If any of the information is incorrect, Joe is instructed to cross it out and type or print the correct information.

If Joe isn’t using a preprinted Form 941, he must type or write his EIN, name, and address in the spaces provided. He is cautioned not to use his social security number or ITIN (individual taxpayer identification number)…In short, Joe should read the *instructions that came with the form, or find them on the IRS website!

Filling out Form 941 isn’t hard. Joe just needs to make sure he understands what the form is asking for, and double checks his work. It’s mostly common sense. He can always call the IRS if he has questions, or contact a reputable tax service. There are several things the IRS wants Joe to do, however:

Use 12-point Courier font if possible (if Joe types his form).
Omit dollar signs and decimal points (they’re already printed on the form)
Leave blank any non-applying section with a value of 0 (excluding lines 1, 2, and 10).
Enter negative amounts with a minus sign. If this is not possible, use parentheses.
Enter his name and EIN on all pages and attachments. (Note: if Joe is using an IRS-preaddressed Form 941, he doesn’t have to enter his name and EIN on page 2.)
Staple pages together in the upper left hand corner.

Joe must also notify employees about the EIC (earned income credit). He must give them either the IRS Form W-2, or substitute A of Form W-2. Both these forms have a section about EIC on them.

When Must Joe Deposit These Taxes?

The IRS tells Joe he should deposit his taxes regardless of how often he pays his employees; but on his total tax liability for the previous  June-July “Lookback Period” . If Joe reported $ 50,000 or less in taxes during this period, he is on a monthly deposit schedule. If he reported more than $ 50,000, he is on a semi-weekly deposit schedule.

How Must Joe Deposit?

 Joe is instructed to deposit the federal income taxes he withheld, employer and employee social security taxes, and employer and employee medicare taxes. If his total taxes after adjustment for advance EIC are:

Less than 2,500 for the quarter, he doesn’t have to make a deposit until the end of the year. This means that he will probably be required (by the IRS) to file form 944 (annual) instead of form 941. Check with the IRS.
2,500 or more for the quarter, he must deposit his taxes by using EFTPS or a financial institution authorized to accept federal tax deposits.

Where Should He File?

The IRS was kind enough to provide Joe with complete a chart available in the *”Instructions for Form 941″ pg. 4. The jist of it is: Joe must file Form 941 at the IRS Service Center designated on the chart–based on which state his business is located in.

Joe Needs Specific Instructions?

He can find specific instructions on pg. 4 in *”Instructions for Form 941″

Tips And Warnings

The IRS compares the amounts reported on Joe’s four quarterly Forms 941 with Form W-2 amounts totaled on his yearly form w-3 (Transmittal of Wage and Tax Statements). If these totals don’t match up, the IRS knows that there is something wrong, and will probably contact Joe and demand an explanation. Hopefully he does not practice fraud. If Joe does, most likely he will be caught and heavily penalized.
EFTPS is an easy and safe way for employers to make all their tax deposits. It helps eliminate common errors made on traditional deposits.
Do not send Form 941 or any payments to the SSA.
Its easy for Joe to tell the IRS that a return is final. All he has to do is check the box on line 18 and enter the date he last paid wages.
Special rules apply on taxes of $ 100,000 ore more accumulated on any day during the deposit period.

*Please see the “Instructions for Form 941 Cat. No. 14625L” for more specific directions regarding form 941; available from the IRS.

This article was sponsored by IRS Tax Help! Do you need help with something tax related? Form 941? Contact us!

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