What is Form 941? An Intro Guide to ERC

A woman writing in a notebook and looking through tax instructions. 

When operating a business, there’s a lot of essential paperwork and tax filing that people must stay on top of throughout the year. With so many forms to file, it can be challenging for business owners to remember everything they need to handle, especially if they’re new to the game.

In the resource below, our team of dedicated tax professionals at TaxRobot will explore everything you’ll need to know about IRS Form 941, including what it is, why it’s important, who’s required to fill it out, and when. Please continue for essential information about this critical business form, and consider browsing through our selection of other expertly written resources.

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IRS Form 941: What is It, and Why is It Important For Businesses? 

More commonly known as the Employer’s Quarterly Federal Tax Return, IRS Form 941 is a specific document that employers must fill out every quarter to report the taxes withheld from every employee’s salary. These taxes include federal income tax, Medicare (FICA), and social security tax. The Form also helps employers calculate and pay an employer’s Medicare and social security tax contributions, along with additional taxes withheld from employee paychecks.

Businesses must fill out Form 941 each quarter (with a few notable exceptions we’ll discuss in the section below). They must also provide complete and accurate data on this Form since the IRS will compare it to information provided on the annual Form W-3

Failure to file Form 941 or filing inaccurate information to underreport your tax liability can result in penalties from the IRS, including a 5% penalty of the total tax amount due and an additional 5% per month charge if the Form isn’t submitted for up to five months. Additionally, Form 941 is required for businesses to receive any Employee Retention Credits (ERC) that they may qualify for if they paid qualified wages to employees after March 12, 2020, and before January 1, 2021.

What Else is Reported on Form 941?

Alongside the social security, Medicare, and federal income tax information noted above, completing Form 941 also requires businesses to report;

  • Wages paid to employees
  • Tips reported by the employees
  • Qualified small business payroll tax credit for increased research activities
  • Any additional Medicare tax withheld from an employee’s paycheck beyond the standard amount required
  • Any current quarter adjustment for Medicare and social security taxes for sick pay, group-term life insurance, and tips

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Who is Required to File Form 941?

Generally speaking, any person or business paying employee wages must file Form 941 quarterly to the IRS. Businesses are also often required to submit these forms even if no employees work during some quarters. Exceptions for filing Form 941 are made for seasonal employers who don’t pay wages to any employees during one or more quarters, along with employers of household employees or agricultural employees. 

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Filling Out and Filing Form 941: The Basics to Note

The top of IRS Form 941 for 2022.

Form 941 is currently available on the IRS website. Business owners can download a blank copy to fill out or complete it online and print out the finished document. Finished documents can be submitted electronically using the IRS Free File system for rapid processing, or a physical copy of the Form can be sent to the address provided on the IRS website, depending on your state.

The calendar deadlines for Form 941 for each quarter are:

  • April 30 for Q1 (Covering January 1 to March 31)
  • July 31 for Q2 (Covering April 1 to June 30)
  • October 31 for Q3 (Covering July 1 to September 30)
  • January 31 for Q4 (Covering October 1 to December 31 of the previous year)

The IRS has specific instructions for employers to fill out their Quarterly Federal Tax Returns. The instructions are often revised and rereleased to include critical information updates. The last update to the Form 941 Instructions was released in June of 2022. 

To help make the process simple, we’ll explain the basics you’ll need to follow for filling out and filing Form 941. There are five sections in Form 941, and you must fill out all of the required information for each section as accurately as possible to avoid potential conflicts and penalties from the IRS.

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Step 1: Gather and Record The Essential Information

You’ll need to include a range of information on Form 941, including;

  • The name of your business, your business address, and EIN
  • Deposits made to the IRS
  • The number of employees you have
  • Medicare and social security tax information
  • Deposit schedule and tax liability information
  • Form 8453-EMP or your Online Signature PIN
  • Signing Authority information

You’ll also need access to your payroll records for the calculations involved in the next step.

Step 2: Calculate Your IRS Payment

Along with the federal income tax that you’ll need to submit to the IRS, you’ll also need to calculate additional payments that reflect;

  • 1.47% of all taxable wages for employees Medicare tax
  • 6.2% of every employee’s total wages (up to $142,800 in 2021- be sure to check the requirements for each tax year, as they can change over time) for social security insurance

Once you have all of the information from these two steps, you can input them into the appropriate sections of Form 941 before submitting the document to the IRS. Please be sure to file your Form before those deadlines to avoid having to pay any additional fees or penalties. 

Final Thoughts and Factors to Consider

A woman using her laptop to fill out Tax information on Form 941.

Our business experts at TaxRobot hope that the above resource has helped explain all of the essential information you’ll need to know about IRS Form 941 as a business owner in the future. If you’d like access to even more great information or want to take advantage of our top-quality AI-powered tax software, please consider signing up on our website.Do you need access to quality tax software? TaxRobot is the best there is!

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