The Internal Revenue Service (IRS) requires most businesses with employees to withhold and deposit federal payroll, Social Security, and Medicare taxes. Failure to make proper tax withholdings or deposits along with required tax forms that periodically need to be filed can result in significant fines and penalties for a business. One of the mandatory IRS forms is Form 941, also known as the Employer’s Quarterly Tax Form, reporting federal withholdings from employees on a quarterly basis. Four times per year, employers need to submit this form according to a set schedule, to avoid penalties and interest, both for taxes paid late and delays in reporting.
A form with zero wages must still be filed, meaning employers must be mindful of filing requirements and deadlines for Form 941. Exemptions from the Form 941 reporting requirements are businesses with household employees and employers in agriculture. Employers working with seasonal employees need to file Form 941 for periods/quarters for which the wages have been paid and may also need to file a $0 return in quarters with no wages.
Form 941 has not one but four annual submission deadlines. As a general rule, it is due at the end of the month following the end of the quarter, as explained below:
- For the first quarter of a year, ending March 31, the deadline is April 30,
- For the second quarter, ending June 30, the deadline is July 31,
- For the third quarter, ending September 30, the deadline is October 31, and
- For the fourth quarter, ending December 31, the deadline is January 31 next year.
If any due date for filing falls on Saturday, Sunday, or a legal holiday, employers may file the form on the next business day.
An extension of these deadlines is not possible. Failure to file Form 941 on time or underreporting tax liabilities may result in IRS penalties. A standard 5% of the tax owed or higher is the initial penalty for late filers.
Form 941 consists of five parts and a payment voucher. When filling out the form, the employer needs to provide data related to:
- Basic business information, including business address, employer identification number (EIN), and the total number of employees,
- The total amount of wages paid to employees,
- Calculation of total Social Security wages for employees,
- Calculation of total Medicare wages for employees,
- Calculation of employer’s Social Security and Medicare tax share,
- Any adjustments for sick pay, tips, group-term life insurance, and other,
- Possible small-business payroll tax credit for increasing research activities if qualified.
The form results in a calculation of the total taxes and the total deposits the employer made during the quarter. Depending on the size of the business, it is usual to withhold and deposit these taxes on either a semiweekly or a monthly basis, the larger the business and its tax withholdings – the more frequently the deposits are due. The difference between the total taxes due and the total deposits made is the amount still owed that must be paid.
Same as many other federal forms, Form 941 comes with a clear set of instructions provided by the IRS website for every portion of its three-page document and these need to be followed to a tee in order to avoid fines and disputes. Businesses submitting the form are encouraged to do that electronically, using E-file. Equally, payments to the IRS resulting from business tax liabilities established in Form 941 should be made through the Electronic Federal Tax Payment System (EFTPS) as it allows for faster processing.
This form, as one of the key components of payroll compliance, is usually updated annually. During the pandemic, these changes were even more frequent, to acknowledge numerous tax relief packages, and these have all been terminated.
Employers are obliged to always use the latest revision of Form 941, keep a close eye out for possible IRS updates by every quarter’s end, and act accordingly, as IRS warns against using earlier versions of the form as erroneous and punishable.
Federally mandated forms such as Form 941 are numerous and complex parts of everyday business operations. However simple the form may appear, handling it confidently from understanding what Form 941 is and what information it requires, through filling it out, storing, or submitting it to authorities, consists of too many steps and processes to count in a single day. It is understandable many employers feel fear of getting something wrong and costing their company serious fines and additional administrative complications.
Form 941 is exactly that type of form. To fill it out, employers need to prepare a lot of data beforehand, they cannot leave any section blank, and they need to make sure all the formal aspects of entering data such as fonts, decimal numbers, and other instructions are followed. The frequency of its submissions does not make things any easier, nor does the frequency of updates help with the correctness. Mistakes happen, and they can be very costly.
In such a situation, automating the process makes all the sense, and ends up costing much less. Payroll tax account employer services take over the burden of keeping track of legislation, and form updates and assist in filing tax forms accurately and on time. Retrieving data on employee wages, withholdings, any adjustments and credits, and balancing with deposits becomes instantaneous and error-free.
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