Q: What’s Form 941 and How Do I Fill It Out?

For Q2 2021, Form 941 is due on July 31, 2021.

 The IRS has made changes to the form this quarter to help reflect new legislation and pandemic relief efforts. Below, you’ll find information on the latest version of Form 941; we walk you through the new form, line by line so you know how best to fill it out.  

IRS Form 941, the Employer’s Quarterly Federal Tax Return, is how you tell the IRS how much was withheld from your employees’ paychecks each quarter.

Specifically, the quarterly report allows you to detail the withholding amount in income taxes, Social Security, and Medicare, along with your portion of Social Security and Medicare tax. 

This guide will teach you the basics of the 941 form along with detailed instructions to help you fill it out. Keep in mind that some full-service payroll services (like Gusto) fill out and file Form 941 automatically so the work is done for you. Check with your payroll provider to see if that’s the case.

Who needs to file Form 941?

Most employers who pay wages to an employee must file Form 941 every quarter. Your business entity doesn’t impact your filing requirements. Regardless of whether you’re a sole proprietor or a C corporation, you’ll need to file Form 941 if you have employees. 

What happens if you don’t have employees for a particular quarter? You’re still required to file Form 941 and report that you didn’t have any tax withholdings. 

In general, businesses with employees are required to file Form 941 every quarter, but there are a few exceptions.

  • Businesses with seasonal employees. If you only hire employees seasonally, then you’re not required to fill out Form 941 every quarter. Instead, you’ll complete Form 941 for the quarter you hired seasonal employees and then inform the IRS that you won’t be filing Form 941 for several quarters. Our instructions below explain how to do this. 
  • People with household employees. If you have a household employee, like a nanny, you don’t need to File 941. Instead, report the tax withholding annually on the Schedule H of Form 1040 (your personal tax return). 
  • Businesses with farm employees. Wages paid for agricultural labor aren’t reported on Form 941. Instead, you’ll use Form 943

Finally, if you received a notification that you’re required to file Form 944 instead of Form 941, then you’re not required to submit Form 941 quarterly (see below for more information on Form 944). 

When do I need to file Form 941?

Form 941 is due on the last day of the month that follows the end of the quarter. For example, the first quarter ends March 31, which means the form is due by April 30. If the filing deadline falls on a weekend or holiday, then the return is due on the next business day. 

If you’ve made your payroll tax deposits on time and in full throughout the quarter, then you have an additional 10 days to complete the form. That changes the deadline to the 10th of the second month following the end of the quarter. For the first quarter, that means you can have until May 10 if needed.

Here’s a breakdown of the Form 941 due dates. 

Months included in quarterQuarter endsForm 941 due dateForm 941 due date with on-time tax deposits
January, February, and MarchMarch 31April 30May 10
April, May, and JuneJune 30July 31August 10
July, August, and SeptemberSeptember 30October 31November 10
October, November, and DecemberDecember 31January 31February 10

What happens if I don’t file Form 941 on time?

Late 941s can lead to penalties and interest, so make sure you file the form by the last day of the month every April, July, October, and January. 

The penalty for filing Form 941 late is 5% of the tax due with the form for each month, or portion of the month, that the form is late. 

What information do I need to file Form 941?

You’ll need your Employer Identification Number (EIN), the legal name you used to apply for the EIN, and your company address. Your business name and EIN will be on every page of the form and any attachments you include.

You’ll use the form to report the following items, so you’ll also need this information on hand before completing the form:

What information do I not report on Form 941?

You only use Form 941 for reporting tax withholdings on employee wages. This means you shouldn’t report nonpayroll withholding on Form 941. These include employee backup withholding and income tax withholding for:

  • Pensions
  • Annuities
  • Gambling wins

Instead, you’ll use Form 945 to report these. 

Where do I file Form 941?

Rejoice! You can file Form 941 online, and the IRS encourages you to do so. You can submit Form 941 electronically with E-File.  

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If you prefer to download the form and fill it out digitally, then you can fill out the form and submit it via mail. Page 6 of the IRS instructions for Form 941 has a table indicating where to send your form. 

If you’re mailing your form, follow these guidelines:

  • Use 10-point Courier font if possible.
  • Don’t use dollar signs or decimal points. Instead, use the preprinted decimals on the form. Don’t round up to whole numbers. You should always write out the cents, even if it’s zero. 
  • Commas are optional.
  • If the value of a field is zero, then leave it blank. The exceptions are lines 1, 2, and 12. These fields must have a zero written in them. 
  • To denote negative numbers, use a minus sign. If you can’t use the minus sign, then use parentheses. 
  • Write your EIN, “Form 941,” and the tax year and quarter on all attachments. 
  • Staple sheets together in the upper left corner. 

Do I send in a payment with Form 941?

That depends on your tax deposit schedule. 

You’re only allowed to send payment with Form 941 if your total tax due is less than $2,500 for the current quarter and was also less than $2,500 for the previous quarter. Then you can send your payment with the Form 941-V payment voucher (we’ll get into this payment voucher in detail below). 

If this doesn’t apply to you, then you must pay your tax liability online. 

What changed with Form 941 in 2021?

Oh, lots of things. In 2020, the goverment stepped in with a number of financial relief efforts to help small businesses weather the pandemic. Among these financial relief efforts were tax credits for:

The new Form 941 includes reporting around those tax credits including reporting wages paid out, advance tax credits received, and the refundable and non-refundable portions of those credits. We’ll get into all of these in details when we walk you through the form below.

What’s the difference between Form 941 and Form 944?

Form 944 is for smaller employers, whose annual tax liability is less than $1,000 for Social Security, Medicare, and withheld federal income tax. These employers will file Form 944 annually instead of every quarter. 

If your employer tax liability and withheld federal income tax is more than $1,000 per year, then use Form 941 and file it quarterly.

What about Schedule B on Form 941? Do I need to fill that out?

Schedule B is only required for employers who deposit their payroll taxes on a semi-weekly payroll schedule. You’re required to deposit your payroll taxes semi-weekly if you reported more than $50,000 in taxes during the lookback period. 

A lookback period is a 12-month period that covers four quarters and always ends on June 30 of the previous year. For example, in 2021 the lookback period is July 1, 2019 – June 30, 2021. 

If you’re required to deposit your payroll taxes on a semi-weekly basis, then you’ll complete Schedule B and attach it to your Form 941. Schedule B reports your daily payroll tax liabilities and total tax liability for each month in the filing period. 

Form 941 instructions

Here’s step-by-step instructions on how to fill out Form 941. You’ll recognize some of these sections from years and quarters past, but many of these lines have changed in 2021. We’ll go through them all here.

First, you’ll need to provide the IRS with some basic information about your business:

  • Employer Identification Number (EIN): Enter your EIN. If you don’t have an EIN, you must apply for one. If you’ve applied for one but haven’t received it yet, then write “Applied for” in the EIN section. 
  • Name: Enter your business’s legal name here. Do not enter your trade name, which is also called a DBA, or “Doing Business As.” 
  • Address: Enter your business’s address. 
  • Report for this quarter of: Check the box of the quarter that you’re filing.

So far, so good; keep it up!

Part 1 of Form 941

  • 1. Enter the number of employees on your payroll for the quarter. Payroll includes wages, tips, commissions, and employee bonuses. Be sure to include the payroll periods of June 12 (if you are filling this out for the second quarter of 2021), September 12 (for the third quarter), and December 12 (for the fourth quarter). Don’t include employees whom you didn’t pay during the quarter. 
  • 2. Enter the total wages, tips, sick pay, commissions, and bonuses paid to all your employees during the filing period. 
  • 3. Write the total amount of federal income tax that you withheld, or were required to withhold, from your employee’s wages. When calculating the federal income tax withheld, include withholdings on taxable fringe benefits and supplemental unemployment compensation benefits. 
  • 4. Check this box if you had no wages or other compensation subject to Social Security or Medicare tax. If this doesn’t apply to you, then leave the box blank.  

Now, we’re getting into the updated parts of the form.

  • 5a. 
    • Column 1: Write the total taxable wages here. This includes:
      • qualified sick leave wages (for leave taken after March 31, 2021); this includes payments made by an insurance company to your employees
      • qualified family leave wages (for leave taken after March 31, 2021)
      • qualified wages you used to calculate ERC (excluding healthplan expenses)
      • fringe benefits subject to Social Security tax that you paid to employees during the quarter
    • Enter the amount before payroll deductions and do not include tips here. If an employee has earned more than $142,800 for the year, which is the Social Security wage base, then don’t enter their wages on line 5a. 
    • Column 2: Multiply the amount you entered in column 1 by 0.124. Enter the total here. 
  • 5a(i).
    • Column 1: Enter the qualified sick leave wages for leave paid out after March 31, 2021, but the emplyee must have taken the leave before April 1, 2021.
    • Column 2: Multiply the amount you entered in column 1 by 0.062. Enter the total here. 
  • 5a(ii).
    • Column 1: Enter the qualified family leave wages for leave paid out after March 31, 2021, but the emplyee must have taken the leave before April 1, 2021.
    • Column 2: Multiply the amount you entered in column 1 by 0.062. Enter the total here. 
  • 5b.
    • Column 1: Put the total amount of tips your employees received during the quarter, even if you were unable to withhold employee tax from the tips. Later, you’ll reduce your taxes by the amount of the employee’s share of the taxes on the uncollected tips. 
    • Column 2: Multiply the amount you entered in column 1 by 0.124. Put the total here.

If an employee earned more than $142,800 in wages and tips for the year, don’t include their tips on this line. 

  • 5c.
    • Column 1:  Put the total taxable wages, sick pay, and fringe benefits subject to Medicare tax for the quarter. There is no limit for wages subject to Medicare tax. 
    • Column 2: Multiple the amount in column 1 by 0.029. Put the total here. 
  • 5d.
    • Column 1: Put the total amount of wages, tips, and other compensation that is subject to additional Medicare tax. Employees must pay additional Medicare tax on earnings over $200,000 in a year. 
    • Column 2: Multiply the amount in column 1 by 0.009. Put the total here. 
  • 5e. Add the amounts from Column 2 on lines 5a–5d. 
  • 5f.  If you received a Section 3121(q) Notice and Demand, enter the tax due here. This document tells you the amount of tips that your employee received that was unreported or underreported to you. 
  • 6. Add lines 3, 5e, and 5f. This is the total tax you owe before any adjustments. 
  • 7. Sometimes the total tax due on Form 941 and the total taxes you deposited may be different due to rounding to the nearest cent each time you completed payroll.

To determine if you have a fractions-of-cents adjustment, compare the amount for Social Security tax, Medicare tax, and additional Medicare tax on Form 941 with the total Social Security and Medicare taxes withheld from each employee. If there is a small difference, it’s a fraction-of-cents adjustment. 

Write this amount on line 7. If the amount you withheld is less than the amount on Form 941, put a negative number here (use the minus sign). If it’s more, then enter a positive number. 

  • 8. If you use a third-party sick-pay payer (insurance company that pays out sick pay for employees on your behalf), then enter the amount of the employee’s portion of Social Security and Medicare taxes that your third-party sick payer deposited and paid. This amount should be a negative number. 
  • 9. Enter a negative number for the total of:
    • The employee share of Social Security and Medicare tax on tips 
    • The employee share of Social Security and Medicare taxes on group-term life insurance policies paid for former employees 
  • 10. Add lines 6–9. Put the total here. 
  • 11a. This line is for employers claiming the payroll tax credit for increasing research activities, called the Research and Development Tax Credit. If you’re claiming this credit, then write the amount from line 12 of Form 8974 and attach this form to Form 941. 
  • 11b. This is a new line on the form this quarter that requests the nonrefundundable portion of qualified sicka and family leave wages taken beofre April 1, 2021. Use Worksheet 1 (page 25 on this form) to help you make the calcualtion; what appears on line 2j of Worksheet 1 should be entered here.

What is the “nonrefundable portion” of a tax credit?

Great question. Let’s start with some basics:

A refundable tax credit means that if your tax credit amount exceeds the amount you owe in taxes, you will get a check from the government for the difference. Not bad, eh? So, if you owe $3,000 in taxes, but your tax credit amount is $3,500, you’ll get a check for $500.

A nonrefundable tax credit means that if your tax credit amount exceeds the amount you owe in taxes, you won’t get a check for the difference. If you owe $3,000 in taxes, but your tax credit amount is $3,500, your tax credit will simply cover your liability and … that’s it. The rest of the tax credit will just disappear.

The nonrefundable portion of a tax credit is the part of the tax credit that covers what you owe in taxes. If you have a refundable tax credit of $3,500 and you owe $3,000 in taxes, then $3,000 is the nonrefundable portion of that tax credit. Conversely, the refundable portion of the tax credit is $500.

Got it?

  • 11f. Report the number of employees to whom you provided COBRA premium assistance for the quarter.
  • 11g. Add up lines 11a, 11b, 11c, 11d, and 11e and enter the total here.
  • 12. Subtract line 11g from line 10. The difference is your quarterly tax liability. 
  • 13.  Enter your total deposits for the quarter as well as any overpayments you made in previous quarters. 
  • 13c. Now it’s time to work out the refundable portion of your tax credits. Remeber that the refundable portion of your tax credit is the part that exceeds what you owe in taxes (if there is a portion that exceeds what owe; that’s a big if). Use Worksheet 1, Step 2, link 2k (go back to page 25) to calculate this amount.
  • 13d. Use Worksheet 2, Step 2, line 2i (page 26) to calculate the refundable portion of your ERC (or you can use our ERC calculator here). Enter the refundable amount on this line.
  • 13e. Use Worksheet 3, Step 2, line 2s (page 27) to calcualte the refundable portion of the tax credit for leave taken after March 31, 2021. Enter the amount on this line.
  • 13f. We’re back to the credit for COBRA premium assistance. Use Worksheet 5, Step 2, line 2h (page 29) to calcualte the refundable portion of the this credit and enter the amount on this line.
  • 13g. Add lines 13a, 13c, 13d, 13e, and 13f and write the total on this line.
  • 13h. If you requested an advance on your tax credits from qualified sicka and family leave of from the ERC, you would have used Form 7200 to do it (trust us). On this line, you must report the total advance amount you have received.
  • 13i. Subtract 13h from 13g and enter the resulting amount on this line.
  • 14. If the amount that appears on line 12 is greater than the amount that appears on line 13i, then subtract the amount on line 13i from the amount on line 12 and enter the difference here. Basically, if the taxes you owe exceed the tax credit amount you are owed (or have received as an advance) then you owe the difference. But, there are some important things to understand:
    • Never make an entry on both line 14 and line 15; those lines are for opposite purposes, so both can’t be true.
    • If the amount that appears on line 14 is under $1, you don’t have to pay it.
  • 15. If the amount that appears on line 13i is greater than the amount that appears on line 12, then subtract the amount on line 12 from the amount on line 13i and enter the result here. Again, you should not use this line and line 14, because both things can’t be true: one of lines 12 and 13i must be greater than the other. Depending on which is greater, you choose the line to fill out. Make sense?

If the amount on line 13i exceeds the amount on line 12 that means you overpayed and deposited more than the correct amount for the quarter; you can choose to have the IRS refund your money or you can apply it to your next tax return. Check the approprate box to choose. If you check neither box or you check both boxes, the IRS will apply the amount to your next return.

You made it through Part 1! Congratulations. Let’s move on to Part 2 of the form.

Part 2

Part 2 Form 941 instructions
  • 16. Check one of the following boxes:
    • Box 1. Check the first box if all of the below are true. If you check this box, you can send in your tax payments when you file Form 941.
      • The amount on line 12 is less than $2,500. 
      • For the previous quarter, the amount on line 12 was less than $2,500. 
      • You didn’t incur a $100,000 next-day deposit obligation for the current quarter. 
    • Box 2. Check the second box if you reported $50,000 or less on line 12 during the previous lookback period. A lookback period is 12 months, covers four quarters, and always ends on June 30.

Basically, you’ll look up the last period that was July 1–June 30 and see if you reported less than $50,000 on line 12 during all four quarters during that period. 

If you check this box, you’re required to deposit your payroll tax payments monthly. Then, enter your tax liability for each month of the quarter and the total for the quarter. 

  • Box 3. Check this box if you reported $50,000 or more of taxes during the lookback period. If you check this box, then you deposit your payroll taxes semiweekly and you’ll need to include Schedule B and attach it with form 941. 

You’re on a roll! Move on to Part 3.

Part 3

Part 3 of this form only applies to you if:

  • You closed your business.
  • You no longer pay employee wages.
  • You’re a seasonal employer and don’t have to file a quarterly return. 
  • You qualified for ERC becuase your business is a Recovery Startup Business
  • You paid out qualified sick and family leave wages and are eligible for a tax credit
  • You paid out qualified wages and health plan expenses and you are eligible for ERC

If none of these apply to you, then skip to Part 4. But if one of these situations does apply, then here’s how to complete Part 3 on Form 941:

  • 17. Check this box if your business has closed or if you have stopped paying employee wages. Then, enter the last date that you paid employee wages. You will also need to attach a statement with the name of the person who will be keeping your payroll records and the address of where the documents will be stored. 
  • 18a. Check this box if you’re a seasonal employer and you don’t need to file a return throughout the year. 
  • 18b. Check this box if you qualify for ERC as a Recovery Startup Business.
  • 19. Use Worksheet 1, Step 2, line 2b to help you work out the qualified health plan expenses you paid out for sick leave taken before April 1, 2021 and enter the amount here.
  • 20. Use Worksheet 1, Step 2, line 2f to help you work out the qualified health plan expenses you paid out for family leave taken before April 1, 2021 and enter the amount here.
  • 21. Use Worksheet 2, Step 2, line 2a to work out the qualified wages you paid out for the ERC and enter the amount here.
  • 22. Use Worksheet 2, Step 2, line 2b to work out the qualified health plan expenses you paid out for the ERC and enter the amount here.
  • 23. Enter the qualified sick leave wages you paid to your employees for leave taken after March 31, 2021, including any qualified sick leave wages that were above the social security wage base. Use Worksheet 3, Step 2, line 2a to help you work this out.
  • 24. Enter the qualified health plan expenses allocable to qualified sick leave wages for leave taken after March 31, 2021. Use Worksheet 3, Step 2, line 2b to help you.
  • 25. Here you will enter the collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions allocable to qualified sick leave wages for leave taken after March 31, 2021. This amount is also entered on Worksheet 3, Step 2, line 2c.
  • 26. Here you will enter the qualified family leave wages you paid to your employees for leave taken after March 31, 2021, including any qualified family leave wages that were above the social security wage base. This amount is also entered on Worksheet 3, Step 2, line 2g.
  • 27. On this line, enter the qualified health plan expenses allocable to qualified family leave wages for leave taken after March 31, 2021. Use Worksheet 3, Step 2, line 2h to work this out.
  • 28. Here you will enter the collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions allocable to qualified family leave wages for leave taken after March 31, 2021. You can use Worksheet 3, Step 2, line 2i to work this out.

Part 4

Part 4 Form 941 instructions

In Part 4, you’ll tell the IRS whether the agency can discuss your return with a designated party.

  • Yes. Check the first box if you want to give the IRS permission to speak to an employee, paid tax preparer, or another person about your Form 941. Then, enter the name and phone number of the person. Do not enter the name of a firm. Instead, put a specific person’s name. Finally, enter a five-digit PIN that the person will use when speaking to the IRS. 
  • No. Check the second box if you don’t authorize the IRS to speak to another person about your return. 

You’re almost there!

Part 5

Part 5 Form 941 instructions
  • Your return must be signed and dated by an authorized person, which varies according to your business type: 
    • Sole proprietorship: The business owner 
    • Corporation and LLC treated like a corporation: The president, vice president, or another principal office authorized to sign 
    • Partnership or LLC treated like a partnership: A partner, member, or authorized officer 
    • Single-member LLC: The owner of the LLC or authorized officer 
    • Trust or estate: The fiduciary 

Form 941-V payment voucher

Form 941 instructions - payment voucher

You’re only allowed to make a payment with Form 941 if you checked the first box of Part 3, line 16. If you checked the second or the third box, you need to make your payments online.  

  • 1. Enter your EIN. If you don’t have an EIN, you must apply for one. If you have applied for one but haven’t received it yet, then write “Applied for” here. 
  • 2. Put the amount of your payment. 
  • 3. Fill in the circle next to the quarter that you’re paying. 
  • 4. Enter your business name and business address. This information must match the information on Form 941. 

Finally, make your check or money order payable to the “United States Treasury” and write the following on your check:

  • Your EIN 
  • Form 941
  • The tax period (for example, “2nd Quarter 2020”)

And that’s it! Now you can fill out Form 941 every quarter. But if all this information has your head spinning, you can opt for a payroll service like Gusto

Gusto fills out Form 941 for you, so you don’t have to worry about calculating employee wages or figuring out lookback periods. Instead, you can focus on what you do best—running your actual business. 

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Comments

  • Nancy

    I’m trying to figure out where in Gusto I can find my 941 forms that were filed by Gusto?

    Reply
  • Shariq

    If I may make a suggestion – I would include the fact that Gusto files this form for you if you have an account with them. I started filling it out and later realized it had already been filed by checking [GUSTO > Documents] on my account.

    Reply
    • Micah Boak

      Thanks for the helpful comment. I was wondering the same thing.

      Reply

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