The day you hire your first employee, you sign up for a quarterly report card from the IRS: Form 941. Payroll software usually fills it out, but the penalties for mistakes land on you, not the software. Here's what it covers and how to make sure it's right.
What it reports
- Wages paid to employees during the quarter
- Federal income tax withheld from those wages
- Social Security and Medicare taxes, both the employee share you withheld and the employer share you owe
- Adjustments, such as for sick pay or tips, and certain credits
When it's due
Form 941 is due by the last day of the month after each quarter ends:
- First quarter: April 30
- Second quarter: July 31
- Third quarter: October 31
- Fourth quarter: January 31
If a due date falls on a weekend or legal holiday, it moves to the next business day. If you deposited all your taxes for the quarter on time, you get until the 10th of the following month to file.
Filing and depositing are different
Form 941 reports your taxes. You pay them separately, through deposits made electronically during the quarter. Your deposit schedule depends on how much tax you reported during a lookback period, which for most employers is the 12 months ending June 30 of the prior year.
- Monthly depositors reported $50,000 or less in the lookback period. They deposit each month's taxes by the 15th of the following month.
- Semiweekly depositors reported more than $50,000. They deposit within a few business days of each payday and file Schedule B with Form 941.
- The next-day rule applies to everyone: if you build up $100,000 or more of tax on any day, it must be deposited by the next business day.
If your total tax for the quarter is less than $2,500, you can generally pay it with the return instead of making deposits.
Common mistakes
- Using the wrong deposit schedule. Confirm yours each year, since it can change as payroll grows.
- Skipping a quarter. You generally must file even for a quarter with no wages, until you file a final return.
- Totals that don't match. Your four quarterly returns should add up to the totals on your W-2s and W-3. Check this before January.
- Assuming the payroll provider has it covered. Review each return and confirm deposits were made. Penalties fall on the employer.
If you find a mistake on a return you've already filed, it's corrected on Form 941-X. Very small employers may be notified by the IRS to file an annual Form 944 instead of quarterly returns.
We'd compare payroll reports to the actual bank withdrawals every quarter before the return is filed, rather than assuming the provider got it right. The penalties land on the employer, so twenty minutes of checking is well spent.