Federal 941: Everything You Need to Know

Federal 941, also referred to as the Employer’s Quarterly Federal Tax Return, is an IRS form required if a company has employees. The form is required to be filled out four times per year. The form itself provides information on total amounts of tax withheld during the quarter for all employees. However, some companies with payroll tax and liabilities less than $1,000 may be able to file Form 944 instead. Another exception to filling out Form 941 is for seasonal employers who don’t pay employees during one or more of the four quarters in any given year, employers of household employees, and employers of agricultural employees.

What’s Included on the Form

  • Amounts withheld from employee paychecks for federal income taxes and Federal Insurance Contributions Act (FICA)  taxes
  • The calculations of the amounts due and how those calculations were made
  • Tips made (i.e. restaurants), commissions, sick pay, holiday pay, and vacation day adjustments
  • Amounts due by the employer
  • Amounts already paid by the employer, whether it be on a weekly or bi-weekly basis
  • Any overpayments or underpayments in taxes

Under the Social Security Act, FICA is in charge of paying monthly benefits to over 41 million retirees and more than 60 million beneficiaries. Such FICA taxes help fund two important federal programs, including the Old-Age, Survivors, and Disability Insurance Trust (OASDI) and Medicare. Both programs assist senior citizens 65 years and older. More specifically, Medicare tax is provided by the Centers for Medicare & Medicaid Services, which is a branch of the Department of Health and Human Services (HHS). The funds are paid to qualifying retirees and the disabled for healthcare, hospice care, and hospital insurance. Notably, there is a third component to the FICA payroll tax, which is called the Medicare surcharge tax; this is a 0.9 percent tax added to taxpayers who earn more than $200,000 a year. The total FICA tax is 15.3 percent in which the employer and employee split the percentage; therefore, each will be responsible for paying 7.65 percent.

The Social Security portion (OASDI) is capped every year at a set amount whereas the Medicare portion is not taxed. Therefore, if you pay your employee more every year, you will still owe Medicare tax. However, if an employee is paid more than $128,400 (wage cap for 2018), they will not need to pay the OASDI Social Security tax on any amount above the wage cap. Within the 7.65 percent, the tax is further broken down as follows:

  • OASDI: 6.2 percent
  • Medicare: 1.45 percent (the other 1.45 percent is to be paid by employee)
  • Medicare surcharge if applicable: 0.9 percent

How to Fill Out the Form

  • Line 1. This includes the number of employees who received wages in the specific quarter.
  • Line 2. This includes the tips, commissions, bonuses, etc. paid to employees. Include all compensation here.
  • Line 3. This includes the total amount of tax withholdings for each employee. This should be broken down for each specific employee.
  • Line 4. If the compensation isn’t subject to Medical or Social Security taxes, you can check this box and skip Lines 5a-5f.
  • Line 5. This helps the employer calculate the total amount that needs to be sent in for Medicare and Social Security. As previously mentioned, part of these funds come from the employer. Lines 5a-5f should include all wages subject to Social Security, Medicare, and tips. All lines within Line 5 will be specific calculations made for determining how much is owed for each specific tax, ensuring that an employer doesn’t overpay or underpay.
  • Line 6. This line is the sum of lines 3, 5e, and 5f, which will be the total amount of taxes owed.
  • Line 7. This should include any discrepancies due to fractional pennies. For example, if the liability in tax was $1,500.395. This number will be mentioned here indicating that there is a discrepancy since you cannot make a payment on 395 cents.
  • Line 8. This line will include information on a third-party sick pay provider, if applicable.
  • Line 9. This line will relate to line 5f if there is any amount of Social Security or Medicare tax that wasn’t collected with regard to tips made by employees.
  • Line 10. Total tax amount after adjustments have been made. This is the amount the employer is required to pay.
  • Line 11. This will indicate how much money was paid throughout the quarter with regard to taxes. This is the amount the employer actually paid.
  • Line 12. If an employer still owes money at the end of the quarter (based on their calculations), the amount owed goes on this line. However, keep in mind that this number should be entered only if Line 10 is greater than Line 11.
  • Line 13. If the employer overpaid, the overpayment amount goes here; therefore, if the amount entered in line 11 is greater than line 10, this is the amount that was overpaid. The employer will then receive a refund. However, this amount can be applied to the next quarter, as well.

If you would like to learn more about IRS Form 941 and federal allowances, or you need help determining what you may owe, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.