Rev. date: 09/2006
Generally, you will file Form 941
, Employer's QUARTERLY Federal Tax Return
, or Form 944
, Employer's ANNUAL Federal Tax Return
, to report wages you have paid, tips your employees have reported to you, federal income tax withheld, social security and Medicare taxes withheld, your share of social security and Medicare taxes, and advance earned income credit payments. Form 944 may be filed only by small business employers who have been notified to file that form. To report wages and taxes for farm employees, you will file Form 943, Employer's Annual Tax Return for Agricultural Employees
The Hiring Incentives to Restore Employment (HIRE) Act, signed into law March 18, 2010, created two new tax benefits that are available to employers who hire certain "qualified employees" in their trade or business. For additional information about the new payroll tax exemption and retention credit created by The HIRE Act of 2010, see Frequently-Asked Questions
A separate Form 941 is filed for each quarter. The first quarter is January through March. The second quarter is April through June. The third quarter is July through September. The fourth quarter is October through December. Form 941 is due by the last day of the month following the end of the quarter. For example, wages you pay during the first quarter, January through March, must generally be reported on Form 941 by April 30th.
If the due date for filing a return falls on a Saturday, Sunday or legal holiday, you may file the return on the next business day.
Some employers with small payrolls, including government employers, file an annual return Form 944
, instead of Form 941 each quarter. Form 944 generally is due on January 31st of the following year (e.g., January 31, 2009 for the 2008 tax year). The purpose of Form 944 is to reduce burden on small business taxpayers by allowing certain employers to file one employment tax return per year to report social security, Medicare, and withheld federal income taxes, and in most cases pay the employment tax with the return. Form 944 is designed for employers with an annual liability of $1,000 or less for social security, Medicare, and withheld federal income taxes.
Employers cannot file Form 944 unless they are notified by the IRS that they qualify to file this form. Currently, the IRS only sends notification of eligibility to file Form 944 upon request by the qualified employer. In 2009, employers could only opt out (that is, request to file Forms 941 instead) if they estimated that their employmment tax liability would exceed the $1,000 threshold or if they wanted to e-file Forms 941 quarterly instead. Beginning in tax year 2010, employers will be able to opt out of filing Form 944 for any reason, if they follow the required procedures. For further information, see the Instructions for Form 944.
Employers notified to file Form 944 whose businesses grow during the year and exceed the $1,000 eligibility threshold should still file Form 944 for the year. Employers who exceed the eligibility threshold will be notified by the IRS that their filing requirement has been changed to Form 941 for a particular year.
Some employers are required to deposit their employment taxes before the Form 941 and Form 944 are filed. For the rules for making deposits, refer to Tax Topic 757
. If you have deposited all your tax on time, you have ten additional days to file.
The total social security and Medicare taxes on Form 941 and Form 944 may differ by a small amount from the total on your payroll records due to fractions of cents that you gained or lost when computing separate amounts for individual employees. You may add or subtract this difference on the line for tax adjustments. Generally, this should not be more than a few cents. You may also use this adjustment line to correct the social security and Medicare taxes you were unable to collect on employees' tips, or for sick pay wages you report but for which social security and Medicare taxes were withheld by a third party, such as an insurance company. If you wish to correct an error on a previously filed Form 941 or Form 944, you will use Form 941-X
, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund
, or Form 944-X
, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund
, respectively. These forms will be used to make adjustments to previously filed Forms 941 or Forms 944 and to claim refunds or abatements of overpaid employment taxes. You will not attach Form 941-X to Form 941 or attach Form 944-X to Form 944. Forms 941-X and 944-X must be filed separately. Form 941c will no longer be used. For more information, see Publication 15, (Circular E), Employer's Tax Guide
, Section 13, or visit the IRS website at www.irs.gov and enter the key words Correcting Employment Taxes
The federal income tax withheld and social security and Medicare taxes are added together on Form 941 and Form 944. If you made advance earned income credit payments to employees during the quarter, these payments are subtracted from your total taxes. Refer to Tax Topic 754
for more information on the advance earned income credit. If you made COBRA premium assistance payments during the period, these payments are subtracted from your total taxes. For more information on the COBRA premium subsidy, visit the IRS website at www.irs.gov and enter the key word COBRA.
The resulting net tax is the amount of employment taxes you owe for the quarter (Form 941) or the year (Form 944). If this amount is $2,500 or more, complete the Tax liability for each month in Part 2 of Form 941 and Form 944, if you are a monthly schedule depositor. If you file Form 941 and are a semiweekly depositor, then report your tax liability on Form 941 (Schedule B)
, Report of Tax Liability for Semiweekly Schedule Depositors
. If you file Form 944 and are a semiweekly depositor, then report your tax liability on Form 945-A, Annual Record of Federal Tax Liability
. The purpose of Part 2 of Form 941, Part 2 of Form 944, Schedule B (Form 941), and Form 945-A is to show the IRS when you paid your employees and the liability for that pay. IRS uses this information to determine if you deposited your employment taxes on time.
For monthly depositors you must show the combined amount of social security, Medicare, and withheld federal income tax owed for each month in Part 2 of Form 941 or Part 2 of Form 944. For semiweekly depositors, you must show the combined amount of social security, Medicare, and withheld federal income tax owed for each day on Schedule B (Form 941) or Form 945–A. Your liability for employment taxes occurs when you actually pay the employees their wages, not when the pay period ends. For example, if your pay period ends September 24th, but you do not pay the employees until October 1st, their wages would be reported in the fourth quarter, when you actually became liable for the tax, not the third quarter when the pay period ended.
It is very important that you complete Part 2 of Form 941 and Form 944, Schedule B of Form 941, or Form 945-A correctly, or it may appear that you did not deposit your taxes when due. There is a late deposit penalty ranging from 2% to 15%, depending on the length of time the deposit is late.
Generally, if your tax liability for the quarter is $2,500 or more and you have made the proper deposits, you should not have a balance due with Form 941 and Form 944. Generally, only taxpayers with a tax liability of less than $2,500 may pay with the tax return. If you pay taxes with your tax return that should have been deposited, you may be subject to a penalty. Be sure Form 941 and Form 944 is signed and dated before mailing it to your service center.
You may find Publication 15
, (Circular E), Employer's Tax Guide
, helpful. It explains all the deposit rules and filing requirements for Form 941 and Form 944.