Form 941: HR and Payroll's Step-by-Step Guide

One of the less glamorous — but absolutely critical — responsibilities of running a business is staying on top of payroll and tax compliance. At the center of this process is one key document: Form 941.

Every quarter, US employers must report payroll taxes to the Internal Revenue Service (IRS) using Form 941. This form confirms businesses accurately withheld the right amount from employee paychecks and paid the right amount of employer taxes.

In this article, we’ll break down everything you need to know about Form 941. From tax filing deadlines to best practices, we’ll help you keep your business compliant, avoid costly penalties, and ensure accurate tax payments.

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What is Form 941?

IRS Form 941, also known as the Employer’s Quarterly Federal Tax Return, is used to report income and Federal Insurance Contributions Act (FICA) taxes — like Social Security and Medicare — withheld from employee's paychecks, as well as your business’s share of FICA contributions. 

Upon completing the form, you will see if your business fulfilled its tax liabilities for the quarter, or if you over- or underpaid. Overpayments can be refunded or applied to your next tax return, while underpayments must be addressed promptly to avoid potential penalties and interest and to remain compliant with IRS regulations. 

What is Form 941-X?

Mistakes happen. If you discover an error on a filed Form 941, you can correct it by submitting Form 941-X, the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. You can use this form to address issues such as misreported wages and tips, to claim a refund after an overpayment, or even retroactively claim tax credits. 

Who needs to file Form 941?

If your business pays employee wages subject to federal income tax withholding and FICA taxes, odds are you need to file Form 941. While this applies to most companies operating in the US, there are a few exceptions:

• Form 944 filers: Employers notified by the IRS to file Form 944, or Employer's Annual Federal Tax Return, will file annually instead of using the quarterly Form 941.
• Seasonal employers: Seasonal employers aren’t required to file Form 941 for periods when they don’t pay employee wages. For example, a summer camp wouldn’t have to file a Q4 report. 
• Household employers: Employers of household employees (like housekeepers, maids, babysitters, and gardeners) are exempt from filing Form 941. Instead, they should file Schedule H, Form 1040.
• Farm employers: These employers are not required to file Form 941 for wages paid for agricultural labor, rather they should use Form 943. 

When should you file?

Form 941 is due by the last day of the month following the end of the quarter. Missing these deadlines can result in penalties, so be sure to mark these quarterly filing deadlines on your calendar:

• Q1 (January, February, March): Due April 30
• Q2 (April, May, June): Due July 31
• Q3 (July, August, September): Due October 31
• Q4 (October, November, December): Due January 31 of the following year

If a deadline falls on a weekend or legal holiday, you can file your return on the next business day. 

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How to File Form 941

You can file Form 941 and pay any associated taxes either electronically or by mail. Most businesses opt for the former as it can be faster, easier, and more secure. 

⚡️ Electronic Filing

Your organization can e-file Form 941 and make payments through the government’s Electronic Federal Tax Payment System (EFTPS) or using one of the following methods:

• Asking your financial institution, tax professional, or payroll provider to make a payment on your behalf
• Asking your financial institution to initiate a same-day tax wire payment for you

While the EFTPS is a free service, these other methods may come with additional fees. Many payroll software systems, like Lattice Payroll, also allow for direct e-filing with the IRS, eliminating the need for manual submission and allowing your business to rest easy knowing your form was filed accurately and on time. 

💌 Filing by Mail

If you decide to mail Form 941, make sure your envelope:

1. Contains your completed Form 941
2. Is properly addressed 
3. Contains sufficient postage
4. Is postmarked on or before the due date

If you’re including a payment, you can pay by money order or check — just be sure to also complete and enclose Form 941-V, or Payment Voucher, along with your submission. Do not staple anything to Form 941 or other documents. Make your check payable to the “United States Treasury” and be sure to include your Employer Identification Number (EIN), “Form 941,” and the applicable tax period in the memo line. 

Keep in mind that the IRS uses different addresses for forms submitted with a payment versus those without. Double-check you have the correct mailing address to ensure your envelope arrives at the right place.

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A Detailed Breakdown of Form 941

Now, let’s dive into how to complete the form and its five distinct sections. We’ll walk through it in detail below.

Company Details

The top of Form 941 requests your company details, including your EIN, business name, trade name (if applicable), and address. Check the box on the right-hand side of the form that corresponds to the quarter you are reporting. Then, you can proceed to the next section.

Part 1: Employee Wages and Tax Withholdings

Next, list the number of employees on your payroll for the quarter in question (line 1), their total compensation (line 2), and the federal income tax you withheld from their paychecks (line 3). When calculating the latter, make sure to include any withholdings from taxable fringe benefits like company vehicles, bonuses, moving reimbursements, supplemental unemployment compensation, and more. 

If you have no wages to report that are subject to Social Security or Medicare taxes, check the box on line 4 and jump to line 6. If you have employee compensation that is subject to these taxes, proceed to line 5.

5a. In column 1, enter employees’ total wages, sick pay, and taxable fringe benefits subject to social security taxes from the quarter. Multiply column 1 by 0.124 (or 12.4%, the current employer’s portion and employee share of Social Security tax as of January 2025) and enter the result in column 2.

It’s important to note your business should stop paying Social Security tax on and entering an individual employee's wages on line 5a when their taxable wages and tips reach the wage base limit for the year. For 2025, the wage base limit is $176,100. You should, however, continue to withhold income and Medicare taxes for the entire year on all wages and tips, even after reaching the $176,100 Social Security wage base.

5b. Enter all reported employee tips in column 1, even if you were unable to withhold employee taxes for them. If an employee’s combined wages and tips exceed the Social Security wage base limit mentioned above, your business can stop including the portion of their tips that goes over this limit on line 5b. Otherwise, multiply the value in column 1 by 0.124 and enter the results in column 2.

5c. Enter all wages, tips, sick pay, and taxable fringe benefits that are subject to Medicare tax and multiply the value by 0.0145 (or the current Medicare tax rate of 1.45%). Add the product to column 2.

5d. Enter wages, tips, sick pay, and taxable fringe benefits subject to the additional Medicare tax for any employee earning over $200,000. Multiply the total by 0.009 and enter the result in column 2.

5e. Add the column 2 values together from lines 5a-5d.  

5f. If your business received a Section 3121(q) Notice and Demand, you’ll need to enter the amount of taxes owed on any unreported or underreported employee tips on this line. 

6. Add together the values in lines 3, 5e, and 5f to calculate your total taxes before adjustments. 

7. Sometimes, rounding (like rounding payroll calculations to the nearest cent) can cause small discrepancies in your taxes. Use this line to make any necessary adjustments, whether positive or negative, to correct these minor variations.

8. If you use a third party for sick pay but they are not your agent, enter a negative adjustment on line 8 for the employee share of FICA taxes that were withheld and deposited by the vendor.

9. Enter a negative adjustment for:

• Any uncollected employee share of FICA taxes on tips
• The uncollected employee share of FICA taxes on group-term life insurance premiums paid for former employees

10. Add together lines 6-9 and put their sum on this line.

11. Small businesses with qualifying research expenses can receive tax credits to help offset those costs. To calculate the amount for this line, use Form 8974, or Qualified Small Business Payroll Tax Credit for Increasing Research Activities. You’ll also need to include Form 8974 when submitting your Form 941.

12. Subtract line 11 from line 10 and enter the result on line 12. The result must be equal to or greater than zero.

13. Line 13 reports your total deposits for the quarter, including any overpayments from previous quarters or from Form 941-X or 944-X, which makes revisions to annual federal tax returns. 

14. Next, calculate your balance due by comparing lines 12 and 13. If line 12 is greater than line 13, you’ll enter the difference here and that will be the total amount your business owes the IRS for the quarter. 

15. If line 13 is more than line 12, your business has overpaid for the quarter. Enter the difference into the box in line 15, then choose what you’d like to do with the excess funds: apply the overpayment toward your next quarterly return or request a refund. Check the box to indicate your choice. 

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Part 2: Deposit Schedule and Tax Liability

This section asks you to check the box that best describes your organization’s deposit schedule and tax liability for the quarter, choosing from the following options:

1. Regular schedule depositor: Employers who reported less than $2,500 on line 12 for either the current or previous quarter — provided they didn’t incur a $100,000 next-day deposit obligation during the current quarter — are not required to make regular monthly or semiweekly deposits. Instead, they can pay the total tax due for the quarter when filing Form 941.
2. Monthly schedule depositor: Did you report fewer than $50,000 in taxes during the lookback period? Unless the $100,000 next-day deposit rule applies, check the second box on line 16 and enter your business’s tax liability for each month in the quarter. 
3. Semiweekly schedule depositor: If your business reported more than $50,000 of taxes during the lookback period, check the third box on line 16, complete Schedule B (Form 941), and submit it alongside your Form 941. 

Part 3: Special Circumstances for Business Operations

You only have to complete this portion of the form if your business falls into one of three special circumstances:

1. Your business has closed
2. Your business no longer pays employee wages
3. Your business is seasonal

If none of these scenarios apply to your business, move on to Part 4. However, if they do, fill out lines 17 and 18. 

17. If your business has closed or is no longer paying employee wages, check the box and enter the date you issued your final wage payment on this line.

18. Seasonal employers are not required to file Form 941 for quarters in which they did not pay any employee wages. However, checking the “Seasonal employer” box on line 18 ensures the IRS is aware of your seasonal status, helping you avoid unnecessary notices about missing returns.

Part 4: Authorizing IRS Communication

This section authorizes (or declines authorization for) the IRS to communicate with an employee, a third-party tax preparer, or another person should they have any questions or need clarification about the return. If you would like them to reach out to a designated individual, share their full name, phone number, and a five-digit PIN they can use to confirm their identity when speaking to the IRS. If you don’t want the IRS to reach out, simply check “No.” 

Part 5: Certifying the Accuracy of the Form

Lastly, it’s time to sign your form. Who can sign your form depends on your business type.

Once signed and dated, your form is all ready to be filed by mail or electronically, whichever you prefer! For the most up-to-date guidance on completing Form 941, visit the official IRS website.

Staying on Top of Payroll Deadlines With Lattice

If you’re looking for help filing Form 941, Lattice has you covered. Apart from ensuring you’re never caught off guard by a filing deadline, Lattice Payroll can help your business: 

• Accurately calculate and pay tax deposits to ensure your payments are correct, timely, and compliant
• Automatically account for adjustments like rounding discrepancies, sick pay, and fringe benefits 
• E-file Form 941 on your business’s behalf
• Provide expert guidance for any tax compliance questions and issues
• And so much more

By streamlining payroll processes and compliance, Lattice can provide your business peace of mind and allow your HR team to focus on other strategic initiatives. Get one step closer to easier, accurate filing by requesting a free demo of Lattice Payroll today.

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