Small business owners have a ton of tax forms to keep up with, and as a result, it can be very easy to get them mixed up. A major part of the problem is that these different forms all look similar, but are denoted with numbers instead of names that mean something substantial and easy to remember. Form 941 is an IRS form that has this very problem, but it's also a key form that cannot be overlooked. It's important to know which business owners this form is made for, what information goes on the actual form, who must use the form, and who is exempt from using it. Knowing this information can help to avoid huge, costly mistakes with the IRS.
This form is also known as the Employer's Quarterly Tax Form and is used by employers to report the federal withholdings from most types of employees. It notifies the IRS of a number of important figures, like the employment taxes taken from employee pay and the amount owed to the IRS. Specifically, Form 941 requires a business owner to report the number of employees, the amounts withheld from each of the employees, all Social Security withholdings, and all Medicare withholdings. It also requires the business owner to list any advances on earned income credits that are paid out to employees, if that's applicable.
As with most tax forms, it can be unclear whether a particular business owner needs to use Form 941 or not. In general, any employers that withhold taxes from their employees' payroll checks will need to fill out a 941. However, there are two main exceptions. The first exception is for people who have household employees like maids or housekeepers. While these employees are exempt from the 941, they do have to be filed on the schedule H portion of Form 1040. Additionally, farm employees will use Form 943 instead of 941, because they have their own special rules for taxes that are different than the normal rules for taxes and withholdings.
Another exception occurs for employees who only work on a seasonal basis. A business owner will only have to include these employees on their 941 if the employees worked during that quarter. This is critical for businesses that have a large influx of seasonal employees, like department stores and retail outlets during the holidays, or businesses that employ teenagers who are out of school during the summer breaks.