IRS Form 941 is a quarterly federal tax return form that all employers should file with Internal Revenue Service (IRS) of the United States. IRS has mandated that all employers should deduct certain taxes such as federal income tax, Medicare tax, and social security tax from the compensation of their employees. The payments from the employer are usually credited to the tax liabilities of the employees and the employers report them on their annual W-2 and to IRS. Additionally, employers should also pay their contribution of Medicare taxes and social security taxes not withheld from employees. IRS Form 941 is meant for reporting and payment of these taxes to IRS.
Who Must File Form 941?
All employers who are withholding taxes should compulsorily file this form. The specific amounts that the employer should report on this form are
- All wages they have paid
- All federal income taxes that they have been withholding from wages of employees
- Medicare and social security taxes of employers and employees
- Adjustments to insurance during the current quarter for which this form is filed for sick pay, group term-life insurance payments, tips, and Medicare and social security taxes for fractions of cents
- Advanced earned payments of income tax credit (EIC)
- Credit amounts of COBRA premium assistance
However, the employers should not report backup withholding or withholding of income tax on non-payroll payments. These amounts such as annuities, gambling winnings, pensions, etc. should be reported annually on IRS form 945.
Don’t File Form 941 if…
Employers need not file this form for seasonal employees and during quarters in which the employers have not paid any wages. Still, such exceptions should be reported on Line 19 of form 941. Similarly, employers who employ people for their household work need not file form 941 but such information should get reported in form 1040 under Schedule H, namely ‘Household employment taxes’. Employers who employ people for farming also need not report form 941 but they should report such employee compensations on form 943 under ‘Employers’ Annual Return for Agricultural Employees’.
Special Circumstances for Filing Form 941
When an employer transfers or sells the business, the seller and the buyer of the business should file IRS Form 941 in the quarter in which the transfer or sale has occurred. However, the seller and the buyer should report the wages to the employees and taxes only for the relative period pertaining to them. The same applies even to mergers, with the merged firm filing a final return and the firm initiating the merger reporting the relevant information in this form for the quarter. Even the conversion of a business to another type such as converting a sole proprietorship as a partnership or as a corporation is transfer of business according to IRS rules. The employer should also submit a final return on form 941 and indicate the closure of the business in Line 18 if the business gets closed. If another person or organization pays wages for the employees of an employer, the name and location of the person or the organization should be reported to the IRS.
The due dates for filing form 941 are April 30, July 31, October 31, and December 31. Further, the employer should also determine the payment schedule prior to the starting of each calendar year. If the taxes paid during the previous two years between July 1 and June 30 are less than $50,000, the employer should pay the taxes on a monthly basis. If the taxes exceed $50,000, the employer should deposit the form 941 amounts twice a week. However, the employer need not make any pre-deposits if the taxes for a quarter are less than $2,500. IRS charges penalties and interest on all late tax payments and late filing of returns and hence, all employers should be prompt in complying with the regulations of IRS Form 941 and other IRS forms.