As an employer, you have plenty of obligations when it comes to filing taxes. Among these is the need to file IRS Form 941, the Employer’s Quarterly Federal Tax Return, on the last day of each month following the end of a quarter. Sticking to these deadlines — April 30, July 31, Oct. 31 and Jan. 31 — is essential for remaining in compliance and avoiding an inquiry from the Internal Revenue Service.
What is Form 941 and Who Has to Submit It?
Form 941 is a summary of the total taxes withheld during the previous quarter by anybody —business or individual — that compensates an employee or employees.
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 who don’t get paid during one or more quarters of the year are exempt as well.
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 be aware of in order to remain compliant.
What the Form Contains
Form 941 requires a significant amount of information, including how many employees a business pays, what the total wages paid were for the quarter, as well as what the total withholding of taxes was for the quarter.
In order to fill the information out accurately, it’s necessary to gather all payroll records and other documentation for the quarter, including reports of any taxable tips that your employees indicated that they received. Once calculated, the employer must send in the form, the appropriate withholding and federal income tax, and 1.45 percent of 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 those employees paid more than $200,000 per year, employers are also required to withhold the Additional Medicare Tax.
Penalties for Failure to File
The Form 941 must be submitted four times per year by the above-referenced dates, and employers who fail to do so face significant penalties of a percentage of whatever tax had been due for each month or portion of a month that is delayed. As you may imagine, this penalty can add up quickly. According to IRS Publication 15 (2020), these are the penalty rates for amounts not properly or timely deposited:
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