What is Form 941 used for?

Form 941 is a simple IRS tax form that every business owner must complete by the end of each quarter. It is the employer’s quarterly federal tax return. Similar to how a W-2 is completed, Form 941 details the wages, tips, or any other compensation paid to employees as part of the employment relationship.

Along with the payments made to the employees, it details employee’s tax withholding for that quarter. When filling out Form 941, employers also need to detail Social Security wages, Social Security tips, and taxable Medicare wages.

If any of the employees earn more than $132,900 annually, they will be subject to Additional Medicare tax which the employer needs to detail on Form 941 as well. This threshold was increased by $4,800 from $132,900 in 2019.

Purpose of Form 941

Since most businesses handle their finances on a quarter to quarter basis, the employers have it easier when they file their tax returns and pay their taxes each quarter. The employer’s quarterly federal tax return form is also used to match the information found on other tax forms. It is a great way for the IRS to match the information and verify that everything is correct.

Other documents that are related to Form 941 include Form W-2 which states wages paid to the employee and taxes withheld.

Overall, the purpose of Form 941 is to make sure employers are withholding tax and contributing to the employee’s FICA taxes. Employers must complete Form 941 by the end of each quarter. Not doing it so will bring monetary penalties. For each month Form 941 isn’t filed, the IRS will assess a 5% penalty. The maximum penalty for each quarter is 25% which can add up over time. It is best to file Form 941 before the deadline.

The due date for filing Form 941 for each quarter can be found in this article.

Also, if you’re going to mail Form 941 with payment, you must use the payment voucher found on the second page of the tax document. What you need to detail here is which quarter you’re paying, business name, address, and the EIN.