Payroll Tax Forms: What Is Form 941 And Why Must You File It?



Posted: Sunday, January 02, 2011

by Wayne M Davies
Wayne M. Davies Inc.

If you own a small business, you have a small mountain of paperwork to climb every year. You are probably most familiar with income tax returns and their onerous filing requirements. But if you have employees, you have a significantly more complicated tax situation. There are several payroll-related tax forms that must be filed. One of them is Form 941, and the purpose of this article is to introduce you to the purpose of this form and its IRS-mandated filing rules.

Form 941 is entitled Employer's QUARTERLY Federal Tax Return. Note that the IRS has graciously emphasized the word "quarterly", so that's a good place to start. The purpose of Form 941 is to report federal payroll information for each calendar quarter, i.e. the 3-month period ending March 31, June 30, September 30 and December 31. Generally speaking, the form must be filed with the IRS by the end of the month following the end of the quarter, i.e. the due dates are April 30, July 31, October 31, and January 31. (Note: if the due date falls on a Saturday, Sunday or federal holiday, the due date is extended to the next non-holiday business day.)

More specifically, the purpose of Form 941 is to report the following federal payroll information for each quarter: 1) Wages and other compensation paid to employees; 2) Federal income tax withholdings from your employee paychecks; 3) Social security tax and Medicare tax withheld from your employee paychecks; 4) Social security tax and Medicare tax that the employer must pay; 5) Federal payroll tax payments the employer has made for the quarter; and 6) Any remaining balance due of the quarterly payroll tax liability.

After adding up all the federal payroll taxes mentioned above, the employer tax payments are subtracted from the payroll tax liability to determine whether there's a refund or balance due. There are therefore three possible end results: 1) The employer has accurately paid the liability amount and there is no refund or balance due; 2) The employer has paid more than the liability and is due a refund; and 3) The employer has paid less than the liability and has a balance due.

If you are entitled to a refund, you can request the IRS to send you a check or you can authorize the IRS to keep the refund and apply it to the next quarter's payroll tax liability. If you have a balance due, you should remit a payment with the return, also enclosing payment voucher Form 941-V.

Looking for more small business tax tips? For a free copy of the 25-page Special Report "How To Instantly Double Your Deductions", visit http://www.YouSaveOnTaxes.com/ . Wayne M. Davies is author of 3 ebooks on small business tax deduction strategies and owner of Fort Wayne Tax Preparation Services.
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