How to Fill Out Form 941

What is Form 941?

Form 941 is also referred to as Employer’s Quarterly Tax Return. This form is used to verify the payroll tax deposits paid on Schedule B (Form 1040 for Income Tax).

The main purpose of Form 941 is to help you match the amount of taxes you owe with the amount of taxes you’ve withheld from employees.

Depending on when your payroll tax deposits are due, you’ll fill out this month bi-weekly or monthly.

Read the official instructions for Form 941. To clarify, you file Form 941 after Form 1040.

Example of how a Form 941 looks like, the top part is general information about yourself and your company

Information Required for the Form

To complete Form 941 you’ll need to know the number of employees who got paid for the current quarter, the total compensation of all employees (including taxable income), total amount withheld of income tax, the total amount of social security and Medicare taxable income without going above the maximum for the year and not including additional Medicare withheld taxes from high-income employees.

We’ll need the total adjustment of sick pay and group term life insurance for the quarter, any advances on earned income credit to employees, the total amount of COBRA insurance payments, and the total payroll tax liabilities for the quarter.

Requirements for Filling Out Form 941 for Business Payroll

Tips Before Completing Form 941

If you submit the current year’s Form 941 (with fourth-quarter info) and submitted before January 31st of the following year, lookout for a couple of things.

Check for the maximum amount allowed for social security because it changes. Social security withholdings above the maximum are not withdrawn from employee wages.

Be on the lookout for high-paid employees’ extra Medicare tax.

Tips Before Completing Form 941

Lines 1 - 6 of Form 941

For Line 1, write the total number of employees who got paid during the quarter. In Line 2, write the total compensation paid to the employees. Line 3, needs the total amount withheld of income tax from the compensation of the employees. Then calculate the Social Security and/or Medicare tax.

Line 4 checks if any wages, tips, or other compensation is subject to Social Security or Medicare tax. For Line 5a – 5d, you’ll be calculating wages, tips, wages & tips, and wages & tips who are subject to an additional Medicare tax.

For Lines 5a – 5d, you’ll enter the initial amount on the left column, and write down the calculated number on the left. For Line 5e, you’ll write the total amount of the columns on the right from Lines 5a – 5d. For Line 5f, see the guidelines in Section 3121(q) Notice and Demand.

For Line 6, you’ll add all the numbers from Lines 3, 5e, and 5f.

Information Needed to Fill Out Form 941 Lines 1-6

Understanding the Adjustments for Form 941

For Fraction of Cents Adjustment, you’ll subtract Line 6 from the amount paid on Schedule B, which should only be a few cents or a few dollars at most. If the amount you paid is lower, write the discrepancy as a negative number.

For Sick Pay Adjustment, let’s say an employee of yours got sick and got paid $1,000 from the insurance company (because you have Sick Pay coverage). You’d add -1,000 to line 8 in Form 941.

For Tips, if the total amount of wages and tips was larger than $200,000 for one employee during a calendar year, you’ll need to report it as Additional Medicare Tax. Include this amount as a negative adjustment.

For Group-Term Life Insurance, if your coverage is more than $50,000, you’ll need to deduct the amount of Social Security and Medicare taxes off each employee’s taxable income. You can deduct the excess amount plus tips in Line 9.

For Line 10, add or subtract all the adjustments of Lines 7 – 9from the number you got on Line 6. Lines 8 – 9 are always subtracted, whereas Line 7 can add be added or subtracted.

Read Reporting Adjustments to Form 941 or Form 944 for more information about adjustments.

Short Explanation of Each Adjustment in Form 941

Balance Due and/or Overpayments of Form 941

For Line 11, you’ll add the total amount of payroll tax credit you got and include Form 8974.

For Line 12, subtract the amount of Line 11 minus the amount of Line 10.

In Line 13, you’ll add the total amount of deposits made for the current quarter, including overpayments from a previous and/or current quarter from Form 941-X, 941-X(PR), 944-X, or 944-X(SP).

For Line 14, enter the difference of Line 12 minus Line 13. If it’s a positive number, you owe money to the IRS.

For Line 15, enter the difference of Line 13 minus Line 12. If Line 13 is greater than Line 12, the IRS owes you money, which can be sent as a refund or applied to the next return.

Balance Due and/or Overpayments in Form 941