IRS Form 941 Instructions
Updated on July 17, 2020 - 10:30 AM by Admin, ExpressEfile
Form 941 is an employer’s quarterly tax form that is filed by employers to report federal income tax withholdings from employees. The calculation of these taxes and filing of this return can be quite confusing. You can take a look at these line-by-line instructions, to get a better understanding of how to file your
Form 941 return.
In this article, we cover the following topics:
1. Provide Business Information
The first step in filing your Form 941 return is to enter basic information about your business.
Employer Identification Number (EIN): Enter your business’s 9-digit EIN. It’s mandatory to have an EIN to file Form 941. What if you don’t have an EIN? Learn more.
Name: Enter the business name associated with the EIN. Please make sure you’re not entering your trade name or DBA name.
Trade name: Enter the other name under which you’re operating your business (if any)
Business address: Enter your primary business address. The IRS will use this address to send important communication.
Choose the correct quarter for which you are filing your Form 941 return. For example, if you’re filing for the Third quarter, check the box next to “July, August, September”.
2. Part 1 - Wages, COVID-19 Changes, Credits
This part of the return involves reporting information about employees, their wages, and the federal income taxes withheld from their paychecks during the quarter.
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Line 1: Number of employees who received wages, tips, or other compensation for the pay period including: June 12 (Quarter 2), Sept. 12 (Quarter 3), or Dec. 12 (Quarter 4)
Enter the number of employees, who received wages, tips, or other payments in
the quarter. -
Line 2: Wages, tips, and other compensation
Enter the total amount of wages, tips, and other payments paid to all the employees in the quarter.
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Line 3: Federal income tax withheld from wages, tips, and other compensation
Enter the total amount of federal tax withheld from all the employees’ paychecks.
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Line 4: Checkbox
If the wages aren’t subjected to any social security or Medicare taxes, check this box. Skip this line if these taxes apply.
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Line 5a: Taxable social security wages
Enter the total taxable social security wages paid to all the employees in the quarter (excluding pretax amounts).
Note: If an employee’s wages exceed the social security wage base limit of $137,000, wages paid after the threshold limit should not be included to the social security wages.
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5a(i) - Qualified sick leave wages (Not part of the original form. Included due to COVID-19 changes)
Enter the applicable amount of qualified sick leave wages that you paid your employees during the reporting quarter. DO NOT include this amount in line 5a.
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5a(ii) - Qualified family leave wages (Not part of the original form. Included due to COVID-19 changes)
Enter the applicable amount of qualified family leave wages that you paid your employees during the reporting quarter. DO NOT include this amount in line 5a.
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5a(i) - Qualified sick leave wages (Not part of the original form. Included due to COVID-19 changes)
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Line 5b: Taxable social security tips
Enter the total amount of taxable security tips received by all employees (excluding pretax amounts).
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Line 5c: Taxable Medicare wages & tips
Enter the total amount of taxable wages, and tips, that are subject to Medicare tax (excluding pretax amounts).
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Line 5d: Taxable wages & tips subject to Additional Medicare Tax withholding
Enter the total amount of taxable wages & tips subject to Additional Medicare Tax withholding (excluding pretax amounts).
Additional Medicare Tax: If an employee’s wages exceed a certain threshold limit, the employer has to withhold additional Medicare tax from the employee’s pay. The threshold limit is based on the employee’s filing status, and the rate is 0.9%. Below is the threshold limit based on filing status:
Filing Status Threshold Limit Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 Qualifying widow(er) with dependent child $200,000 -
Line 5e: Total social security and Medicare taxes
This line should contain the sum of values from column 2 of lines 5a, 5b, 5c, and 5d.
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Line 5f: Section 3121(q) Notice and Demand—Tax due on unreported tips
Enter the total tax due received from Section 3121(q) Notice and Demand.
Section 3121(q) Notice and Demand - This is issued by the IRS to advise the employers to report the tips that the employees haven’t reported. The employers aren’t required to report this information until they receive this notice.
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Line 6: Total taxes before adjustments
The value entered in this line should be a sum of lines 3, 5e, and 5f.
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Line 7: Current quarter’s adjustment for fractions of cents
Enter the adjustment for a fraction of cents.
Fractions-of-cents: While running payroll, social security and Medicare taxes are calculated. If the calculated tax values are in fractions-of-cents, the amount will be rounded to the nearest cent. If you notice a small difference between your total taxes after adjustments and credits and total deposits, you have to report in this line.
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Line 8: Current quarter’s adjustment for sick pay
Enter the adjustment for sick pay.
If your third-party payer of sick pay transfers the liability for the employer share of Social Security and Medicare taxes to you, enter a negative adjustment on line 8 for the amount the third-party payer withheld and deposited.
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Line 9: Current quarter’s adjustments for tips and group-term life insurance
Enter the adjustments for tips and group-terms life insurance.
Enter a negative adjustment for any uncollected employee share of social security and Medicare taxes on tips, and the uncollected employee share of social security and Medicare taxes on group-term life insurance premiums paid for former employees.
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Line 10: Total taxes after adjustments
Enter the total tax after the adjustments. Add the values from lines 6, 7, 8, and 9.
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Line 11a: Qualified small business payroll tax credit for increasing
research activitiesEnter the amount calculated in Form 8974.
Form 8874 - This form is used to calculate the amount of credit that can be claimed for the increasing research activities.
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Line 11b: Nonrefundable portion of credit for qualified sick and family leave wages from Worksheet 1 (Not part of the original form. Included due to
COVID-19 changes)Use Worksheet 1 to calculate the amount of the combined credit for qualified sick leave wages and qualified family leave wages for which it is eligible with respect to the quarter.
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Line 11c: Nonrefundable portion of employee retention credit from
Worksheet 1 (Not part of the original form. Included due to COVID-19 changes)Use Worksheet 1 to calculate the amount of the employee retention credit for which it is eligible with respect to the quarter.
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Line 11d: Total nonrefundable credits
Enter the total amount of non-refundable credits. Add lines 11a, 11b, and 11c.
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Line 12: Total taxes after adjustments and nonrefundable credits
Enter the total taxes after the adjustments and credits. Subtract line 11d from line 10.
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Line 13a: Total deposits for this quarter, including overpayment applied from a prior quarter and overpayments applied from Form 941-X, 941-X (PR), 944-X, or 944-X (SP) filed in the current quarter
Enter the total amount of deposits for the quarter. This should include overpayment applied from previous quarters and Form 941-X for the current quarter.
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Line 13b: Deferred amount of the employer share of social security tax (Not part of the original form. Included due to COVID-19 changes)
Enter the amount of the employer share of social security tax that you chose to defer instead of depositing for the normal deposit deadlines in the quarter.
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Line 13c: Refundable portion of credit for qualified sick and family leave wages from Worksheet 1 (Not part of the original form. Included due to COVID-19 changes)
After determining the combined nonrefundable credit for qualified sick leave wages and qualified family leave wages through using Worksheet 1, subtract the amount of the non refundable portion from the total amount of the combined credit to determine the amount of the refundable portion. Enter the refundable portion of the combined credit identified in Line 2k of the worksheet.
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Line 13d: Refundable portion of employee retention credit from Worksheet 1 (Not part of the original form. Included due to COVID-19 changes)
After determining the nonrefundable employee retention credit using Worksheet 1, subtract the amount of the non refundable portion from the total amount of the credit to determine the amount of the refundable portion. Enter the refundable portion of the credit identified in Line 3k of the worksheet in Line 13d.
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Line 13e: Total deposits, deferrals, and refundable credits (Not part of the original form. Included due to COVID-19 changes)
Enter the total amount of refundable credits. Add lines 13a, 13b, 13c, and 13d.
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Line 13f: Total advances received from filing Form(s) 7200 for the quarter (Not part of the original form. Included due to COVID-19 changes)
Enter the total of the credit advances that you received through filing each Form 7200 filed for the quarter.
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Line 13g: Total deposits, deferrals, and refundable credits less advances (Not part of the original form. Included due to COVID-19 changes)
Enter the total amount of deposits, deferrals, and refundable credits less advances. Subtract line 13f from line 13e.
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Line 14: Balance due
Enter the difference if line 12 is more than line 13g. You must pay the balance due.
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Line 15: Overpayment
Enter the difference if line 13g is more than line 12. You can claim the credit amount.
CheckBox - Apply the credits to pay taxes for the next return, or receive a refund.
3. Part 2 - Deposit schedule and tax liability for the quarter
This part requires you to enter information about the tax liability and the time of deposit.
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Line 16: CheckBox
Check the appropriate box based on your tax liability. Check the boxes if it passes the following conditions.
CheckBox 1
- If the value on line 12 is less than $2500.
- If the value on line 12 was less than $2500 for the previous quarter.
- If you didn’t incur a next-day deposit obligation of $100,000 for the current quarter.
CheckBox 2
If you’re a monthly schedule depositor for the quarter. You need to enter the value of tax liability for each month during the quarter. Your total liability for the quarter should be the same as the value on line 12.
CheckBox 3
If you’re a semiweekly schedule depositor for the quarter. Enter the tax liability on Schedule B and attach it along with your Form 941.
4. Part 3 - About your business
This section is used to provide information about your business.
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Line 17: CheckBox
Check this box if your business was closed or didn’t pay any wages for the whole quarter. If you check this box, enter the date on which the wages were finally paid.
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Line 18: CheckBox
Check this box if you’re a seasonal employer, and you aren’t required to file Form 941 for every quarter.
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Line 19: Qualified health plan expenses allocable to qualified sick leave wages (Not part of the original form. Included due to COVID-19 changes)
Enter the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified sick leave wages.
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Line 20: Qualified health plan expenses allocable to qualified family leave wages (Not part of the original form. Included due to COVID-19 changes)
Enter the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified family leave wages.
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Line 21: Qualified wages for the employee retention credit (Not part of the original form. Included due to COVID-19 changes)
Enter the amount of qualified wages factored into determining the amount of the employee retention credit for which you're eligible.
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Line 22: Qualified health plan expenses allocable to wages reported on line 21 (Not part of the original form. Included due to COVID-19 changes)
Enter the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees who were paid qualified wages that were factored into calculating the employee retention credit.
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Line 23: Credit from Form 5884-C, line 11, for this quarter (Not part of the original form. Included due to COVID-19 changes)
Enter the credit from Line 11 of Form 8554-C for this quarter. Skip this line if you aren’t required to file Form 8554-C.
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Line 24: Deferred amount of the employee share of social security tax included on line 13b
Enter the employee share of deferred social security taxes. This is already included in line 13b.
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Line 25: Reserved for future use
No need to report anything in this line.
5. Part 4 - Third Party Designee - CheckBox
Check this box if you decide to discuss your Form 941 return with the IRS.
If you choose yes - Enter the designee’s name and phone number. Provide any 5 digit PIN, which should be used while talking to the IRS.
If you choose no - Skip this section.
6. Part 5 - Signature
After the completion of all the parts in Form 941, you are required to sign the form before transmitting it to the IRS. Here are the signing authorities for each type of companies:
- Sole proprietorship: Individual who owns the company
- Corporation or an LLC treated as a corporation: President, vice president, or other principal officer
- Partnership or an LLC treated as a partnership: Partner, member, or officer
- Single-member LLC: Owner of the LLC or a principal officer
- Trust or estate: The fiduciary
- Paid Preparers - Tax preparers must have filed a valid power of attorney form, to file Form 941 on behalf of a client. The paid preparer must provide his name, address, phone number, signature, and PTIN.
Form 941 has been revised for quarters 3 & 4 by the IRS to accommodate the relief measures passed by the federal government to overcome the COVID-19 pandemic.
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