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How to Complete Form 941 in 5 Simple Steps
As a small business, you have a long to-do list. Completing tax forms may not be at the top. However, you should understand which tax forms apply to your business or else you could face steep penalties. But, how can you keep up with so many forms with confusing names such as W-2, W-4, 1099-NEC or 941?
Most businesses that pay employees are required to file a Form 941, the Employer’s Quarterly Tax Form with the IRS. Form 941 reports the income and payroll taxes you withheld from your employees’ wages, as well as provides space to calculate and report Social Security and Medicare taxes. The IRS charges a percentage of total tax due as a penalty for each month the form has not been submitted.
Let’s look at how to fill out Form 941.
Why Must My Business Submit Form 941 to the IRS?
If you have employees for your U.S. business or non-profit organization, you’ll need to submit a Form 941 to the IRS four times each year. As the employer, when you pay your employees, you must withhold federal income tax, Social Security, and Medicare taxes from each paycheck and remit these amounts to the IRS. On Form 941, you report how much tax is withheld for your employees each quarter. The total amounts reported on all of your Forms 941 should equal the numbers you report on the Form W-2, that you give your employees, and the Form W-3, that you file with the Social Security Administration. Failure to submit a Form 941 could result in penalties for each month that the tax form is late.
What is Form 941?
Employers use Form 941 to report the income taxes, Social Security taxes, and Medicare taxes from the employees’ paycheck for each quarter. Additionally, you indicate the portion of the Social Security tax and Medicare tax paid by the employer for each quarter.
These forms are due on the last day of the month following the end of a quarter. For example, for the first quarter of the year, you must submit your form by April 30th. For the second quarter, you must submit your form by July 31st. For the third quarter, you must submit your form by October 31st. Finally, for the fourth quarter, you must submit your form by January 31st. If the due date falls on a weekend or a holiday, then the due date is extended to the next business day.
If you fail to file your Forms 941 or you file them late, you can face penalties from the IRS. For example, you could be penalized five percent (5%) of the tax due with each Form 941 for each month or partial month for a late form. This penalty caps at twenty-five percent (25%). You could face a second penalty for making payments late or not paying enough. This penalty can range from two to fifteen percent (2-15%) of the underpayment, depending on how late the payment is made.
How Do I Complete Form 941?
Let’s jump into filling out a Form 941. Here’s what you need to know.
Step #1: Number of Employees & Total Wages for the Period Being Reported
First, on line 1, you need to report the number of employees who you paid during the quarter. On line 2, you indicate the amount of total compensation paid to each employee during the quarter.
Step #2: Amounts Withheld from the Pay of Employees for the Period
Second, on line 3, you report the total amount of income tax withheld from each employee’s paycheck during the quarter.
Step #3: Taxable Social Security and Medicare Wages for the Period
Third, on line 5a, you enter the total amount of compensation that’s subject to Social Security taxes in Column 1. Multiply this amount by .124 and enter the result in Column 2. If your employees receive tips, you’ll repeat this process for the number of tips, entering the results on line 5b. On line 5c, enter the total amount of compensation that’s subject to Medicare tax in Column 1 and multiply that amount by .029. Enter the result in Column 2. If any employees exceeded the Medicare limit they would be subject to additional Medicare tax on line 5d. Multiply the additional amount by 0.9% and enter in Column 2. Add up all of the amounts on lines 5a, 5b, 5c and 5d and enter the sum on line 5e.
Step #4: Calculation of Total Social Security and Medicare Wages
The Federal Insurance Contributions Act tax, or FICA tax, is the contribution to Social Security and Medicare. This tax is calculated as a percentage of each employee’s salary. For 2023, the Social Security tax equals 12.4 percent of the first $160,200 of compensation. For Medicare, the tax equals 2.9 percent (Plus 0.9% for employees exceeding the threshold) on the full amount of the employee’s salary.
For employees, the employer pays half of both taxes and the employee pays the other half. If you're self-employed, then you pay the total amount of both taxes, otherwise known as self-employment taxes since you don’t have an employer. However, for self-employed individuals, you can take a deduction on half of this amount of taxes when you file your taxes.
Step #5: Adjustments for Sick Pay, Tips, Group-Life Insurance, and Others
You can also make certain adjustments for certain payments or benefits. For example, from your totals, you can subtract any Social Security or Medicare taxes deducted from sick pay, paid by third parties like insurance companies. Further, you can deduct the uncollected share of the employee portion of Social Security and Medicare taxes on tips. You can also deduct group-term life insurance premiums paid to your former employees. Finally, you can deduct the Social Security tax deducted from COBRA premium assistance payments. You would total these adjustments and enter the result on Line 10.
Once you enter your total tax deposits for the quarter on line 13a and subtract your total deductions on lines 10 and 12, you can determine if you’ve overpaid or underpaid your employment taxes for the quarter. If your total taxes entered on line 12 are higher than your tax deposits on line 13g, you’ll owe a balance. Enter this balance owed on line 14. If your total taxes entered on line 12 are less than your tax deposits on line 13g, then you’ve overpaid your taxes for the quarter. You can apply the overpayment to the taxes you’ll owe the next quarter, or you can ask for a refund.
How to Submit Form 941
You can send in your Form 941 and payment by mail to the IRS. You can also electronically file, or e-file, your Form 941. E-filing saves you time, it’s secure, and you receive an acknowledgment of receipt within a day.
If you want to e-file these forms yourself, you’ll need to purchase IRS-approved software. You also will have to pay a fee to file the returns electronically. Finally, you’ll have to sign your form, through either an online signature or by scanning Form 8453-EMP, Employment Tax Declaration for an IRS e file Return. If you apply for the online signature, allow for forty-five (45) days for a pin to be sent to you in the mail. You can also have an experienced accountant, or a reputable payroll provider electronically file these forms for you.
How Can SurePayroll Help?
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.