Payroll Services for Small Business

Small Business Advice — for Small Business Owners — Asking 'How to Do Payroll'

How to Fill Out Form 941


Yes, more required paperwork for the small business owner!

Payroll Services for Small Business aims at clarifying the whole payroll processing procedure. Here’s some info on how to fill out IRS Form 941.

Every quarter, by the last day of the month following each CALENDAR quarter, all employers who have withheld federal income tax (or even paid wages) need to fill out Form 941 and file it with the federal government.

And, once you need to file Federal Tax Form 941 during a year, you need to file it for all the quarters in that year. Why?  Because all the totals on the 4 quarters need to equal the totals of the W-2 forms you give out to your employees in January of each year.

(The IRS Form W-2 is the form the small business owner gives to the employees in January of each year to let the employee know exactly what they made and which payroll taxes were withheld. The federal government is given a duplicate copy of the W-2 form. The employee uses the W-2 form to file their income tax return.)

What Information Goes on the Form 941?

The Internal Revenue Service (IRS) needs to know:

1)      how much you paid each employee,

2)      how much income tax you withheld from each employee,

3)      how much Medicare tax and Social Security tax you withheld and

4)      how much you paid out of your own pocket for Medicare and Social Security

This information goes onto the Form 941. You only report one quarter on each Form 941.


Where do I get my IRS Form 941 from?

When a small business owner starts a small business he/she needs to apply to the government for an EIN (Employee Identification Number) (See more EIN info here). Your application for the EIN will state that you intend to pay wages to an employee.

After you receive your Employee Identification Number the IRS will automatically send you the IRS Form 941 with instructions on filing them out.

Each IRS 941 Form  needs to have your EIN on it. This is important! If, for some reason, you use a Form 941 that you obtain from some other source, you need to make sure your own EIN is put onto it.

Ideally, you will contact the IRS to get the form directly from them if you should not receive it automatically. (What a nightmare for both you and the government if you don’t put the EIN on it. And, you’ll still be eligible for penalties for not filing if you don’t put your number on the form.)

If you’ve kept accurate records of each paycheck you will find it easy to fill out the form, and, of course, if you use a computer – and a payroll software — either in-house or outsourcing – then the return will be extra easy. If you entered the correct data in the computer, then the correct data will end up on your 941 forms. All payroll software programs  have the ‘know-how’ to print out the information for the 941 Tax Form.


How Do I Pay the Payroll Taxes Due?

Rarely do you send money with your Federal Tax Form 941, but make deposits of funds withheld from the paychecks by using the Electronic Federal Tax Payment System (EFTPS) .  We have more info on making EFTPS payments in other articles.


What About State Income Tax?

Many states have state income tax that is withheld from paychecks. Each state makes its own laws. The state income tax withheld is paid directly to the state. It is NOT included on the IRS 941 tax form and NOT paid to the federal government on the IRS Form 941. Each state has its own forms.


What is IRS Circular E?

Circular E, (also known as Publication 15, or the Employer’s Tax Guide, or Federal Circular E, or IRS Circular E, or IRS Publication 15) will provide you with exact details about how to fill out the 941 Tax Form. It’s the complete guidebook to all the IRS laws about federal tax withholding from paychecks and then paying them to the Internal Revenue Service.

You can download IRS Circular E from the federal government by searching for Internal Revenue Service – Forms – Circular E – on the internet. Also, you can find more information about Circular E in some of our other posts.


The Bottom Line?

It is easy to learn how to fill out the 941 Tax Form. At Payroll Services for Small Business we truly feel the Publication 15 (IRS Circular E) has improved considerably over the years (thank  heavens). The IRS has tried to make it as easy as possible to understand and follow,  and still protect themselves legally. (Smile)

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