What Are the Differences Between IRS Form 940, Form 941 and Form 944

February 12, 2024 by Joe Grimes

While owning a business can be rewarding on many levels, to run it successfully, employers have to meet different types of requirements ranging from paying quarterly estimated taxes to filling out seemingly endless tax forms.

One of the employers’ most important responsibilities is knowing which Internal Revenue Service (IRS) payroll forms to fill out based on their employees and business type. Even though this can be difficult given that they all seem similar, to avoid massive and costly mistakes, employers must understand the differences between IRS Form 940, Form 941 and Form 944.

What Is IRS Form 940?

IRS Form 940 is the Employer’s Annual Federal Unemployment Tax Return. This payroll tax form is used to report the federal unemployment (FUTA) tax, alongside with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax.

To calculate how much FUTA tax an employer owes, the IRS uses Form 940 and requires the majority of employers to file it every year. Thus, the form helps both the IRS and individual employers understand and keep track of FUTA tax that is owed and paid throughout the year.

Employers file IRS Form 940 if either of the following is true:

  • They paid wages of at least $1,500 to any employee during the standard calendar year, or
  • They had a temporary, part-time or full-time employee work anytime during twenty or more weeks. The twenty weeks do not need to be consecutive.

IRS Form 940 is an annual filing, meaning that employers have to complete and file it once per year. For the majority of businesses, the form for the prior year is due on January 31 of each year. However, it is important to note that IRS Form 940 taxes must be paid quarterly if employers owe $500 or more in FUTA tax for that quarter or cumulatively for the year. If employers’ quarterly liability is less than $500, they can carry that balance over to the following quarter, until the total liability surpasses the $500 threshold. Once that happens, they have to pay the full balance in that quarter.

Quarterly payment deadlines for IRS Form 940 fall on the last day of the month following each quarter. In other words, January 30, April 30, July 31 and October 31.

What Is IRS Form 941?

Also known as the Employer’s Quarterly Tax Form, IRS Form 941 is used to report income taxes and payroll taxes that employers withheld from employees’ wages. It also provides space to calculate and report Social Security and Medicare taxes.

Most businesses are required to file Form 941 quarterly, with a few exceptions. Seasonal businesses only need to file for the quarters in which they are operating. Businesses that hire farm workers or household employees do not need to file Form 941. If a business pays less than $1,000 in employment tax in a given tax year, employers need to file Form 944 instead.

IRS Form 941 includes information such as wages, employee tips, federal income tax withholdings, employer and employee shares of Social Security and Medicare taxes and additional Medicare tax withholdings. Employers may also need to include quarterly adjustments to Social Security or Medicare taxes for sick pay or tips.

To avoid penalties, IRS Form 941 has to be filed with the IRS one month after the last day of the reporting period:

  • April 30, for the first quarter covering January 1 to March 31;
  • July 31, for the second quarter covering April 1 to June 30;
  • October 31, for the third quarter covering July 1 to September 30; and
  • January 31, for the fourth quarter covering October 1 to December 31.

What Is IRS Form 944?

Form 944 is an IRS form that small businesses use to file their employer taxes on an annual basis. It is specifically for businesses that have at least one employee and owe less than $1,000 annually in federal taxes.

Employers must have IRS permission to file Form 944.Once they receive their Employer Identification Number (EIN), new business owners are told if they can file IRS Form 944 while existing businesses who have previously filed IRS Form 941 need to request permission to file IRS Form 944.

Therefore, employers file IRS Form 944 if they:

  • Paid wages to a W-2 employee;
  • Owe $1,000 or less in withholding and FICA taxes for the year;
  • Have written permission from the IRS to file Form 944; and
  • Did not file a return for the prior year, if they have nothing to report.

IRS Form 944 is submitted once annually instead of quarterly, and the due date is January 31 of the subsequent calendar year.

Staying on Top of IRS Payroll Forms

Missing a payroll tax deadline or filing the wrong form can have expensive consequences given that the IRS penalizes businesses with fines that vary by the level of the charge. Therefore, it is necessary for employers to know which IRS payroll forms they need to file, their due dates, where to send them as well as the differences between them.

IRS Form 940, Form 941 and Form 944 may seem similar, but there are distinctions between them that employers need to take into account. Failure to do so can result in different fines and accuracy in filling out forms is mandatory to prevent inadvertent underpayment of taxes which also incurs penalties.

At the same time, obtaining all necessary tax-related forms such as IRS Form 940, Form 941 or Form 944 is now easier than ever with efficient, automated systems for tax management. This allows employers to resolve the challenge of managing different IRS payroll forms while keeping all information safe due to encryption techniques. Furthermore, they can enhance their tax compliance by preventing incorrect information, speeding up the entire process, and staying ahead of the latest tax requirements.

Leverage payroll tax consulting to ensure constant compliance with the IRS and submission guidelines, the accuracy of payment and adherence with the changing regulations.

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