As an employer, you have lots of obligations when it comes to filing taxes. This includes the need to file IRS Form 941. Form 941 is the Employer’s Quarterly Federal Tax Return. This form needs to be turned in on the last day of each month following the end of a quarter. Sticking to the deadlines — April 30, July 31, Oct. 31 and Jan. 31 — is essential for staying in compliance and avoiding a call from the Internal Revenue Service.
What is Form 941 and Who Has to Submit It?
Form 941 is a summary of all taxes withheld during the previous quarter by anybody that pays an employee.
If you are an employer who pays wages to household employees or agricultural employees, you are exempt from this rule. Those who employ seasonal workers are exempt as well. (Seasonal workers are those who don’t get paid during one or more quarters of the year.)
All other employers are required to submit the form, regardless of whether they pay employees during a given quarter or not. This is a common misconception that is important to know in order to remain compliant.
What the Form 941 Contains
Form 941 requires a significant amount of information. For example, how many employees a business pays, what the total wages paid were for the quarter. Also what the total withholding of taxes was for the quarter.
In order to fill out the information correctly, it’s necessary to gather all documentation for the quarter. This includes payroll records and other reports of any taxable tips that your employees indicated that they received.
Once calculated, the employer must send in the form, and taxes. Taxes include the appropriate withholding and federal income tax. As well as all taxable wages for the Medicare tax payment. Social Security payments of 6.2 percent of each employee’s wages must also be submitted. (Up to $132,900 for tax year 2019). For any employees paid more than $200,000 per year, employers are also required to withhold the Additional Medicare Tax.
Penalties for Failure to File Form 941
The Form 941 must be submitted four times per year (see dates above. Employers beware – if you neglect this, you face significant penalties. The penalties are a percentage of whatever tax had been due for each month. As expected, this penalty can add up quickly! According to IRS Publication 15 (2020), these are the penalty rates for amounts not properly or timely deposited:
- 2% – Deposits made 1 to 5 days late.
- 5% – Deposits made 6 to 15 days late.
- 10% – Deposits made 16 or more days late. (But before 10 days from the date of the first notice the IRS sent asking for the tax due.)
- 10% – Amounts that should have been deposited, but instead were paid directly to the IRS. Or paid with your tax return. (See “Payment with return” within Pub. 15 for an exception.)
- 15% – Amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due. OR the day on which you received notice and demand for immediate payment, whichever is earlier.
Balancing Out the Year
At tax time, businesses need to reconcile the amount reported on the four Form 941s they submitted with the employee wages reported on the W-2 forms. (Those are the forms provided to employees so that they can fill out their own tax returns). The total of the Form 941s should be the same as the total on the W-2s. This total should also match what is on the Form W-3 that employers file with the IRS.
Contact this office at (360) 778-2901 for assistance or any questions regarding your Form 941 requirements. Or fill out the form below and we will contact you.
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