The 941 Form, or Employer’s Quarterly Federal Tax Return, is a critical report for employers to submit to the IRS. It details the income taxes, Social Security, and Medicare taxes withheld from employee paychecks, as well as the employer's share of Social Security and Medicare taxes.
To run the 941 report, navigate to the "Reports" module and search for 941. If the report does not pop up, press the green "+New" button to add it.
Select the year and quarter, then hit the build report button. A preview of your 941 report will populate below.
The individual boxes can be populated as needed to complete the 941 report.
- Box 1: Number of Employees
Enter the total number of employees who were paid wages, tips, or other compensation during the reporting period. This includes full-time, part-time, and temporary workers. It does not include independent contractors or any workers classified as non-employees. Ensure this count reflects the total unique employees, not the number of payroll entries. - Box 2: Wages, Tips, and Other Compensation
This box captures the total taxable wages, tips, and other compensation paid to employees during the quarter. This amount should align with the gross wages recorded in your payroll system for all employees before deductions like income taxes or retirement contributions. Exclude non-taxable benefits or reimbursements. - Box 3: Federal Income Tax Withheld
Enter the total amount of federal income tax withheld from employee wages during the reporting period. This is calculated based on employee Form W-4 elections and should include withholding on any supplemental wages or bonuses paid during the quarter. - Box 4: Adjustments for Qualified Sick Leave and Family Leave Wages
If applicable, enter the adjustments related to qualified sick leave and family leave wages that are subject to specific tax credits. These adjustments are often relevant for compliance with special IRS programs and credits. Your payroll engine may automatically calculate these adjustments based on how wages were coded during payroll processing. - Box 5a: Taxable Social Security Wages
Report the total wages paid during the quarter that are subject to Social Security tax. This includes regular wages and any bonuses up to the annual Social Security wage base limit. The payroll engine should calculate this amount based on employee earnings and applicable exclusions. - Box 5b: Taxable Social Security Tips
Enter the total tips declared by employees that are subject to Social Security tax. This includes tips reported by employees and any employer-allocated tips. Ensure this amount is consistent with records of reported tips from employees. - Box 5c: Taxable Medicare Wages and Tips
This box records all wages and tips subject to Medicare tax. Unlike Social Security wages, there is no wage limit for Medicare tax, so the payroll engine should calculate the full amount of taxable wages and tips. - Box 5d: Taxable Wages and Tips Subject to Additional Medicare Tax Withholding
Report wages and tips that exceed the threshold for additional Medicare tax. This threshold applies only to individual earnings over a specific amount during the calendar year. Your payroll engine should flag these earnings automatically once an employee crosses the threshold. - Box 5e: Total Social Security and Medicare Taxes
This is the sum of Social Security and Medicare taxes calculated for wages and tips in Boxes 5a through 5d. This includes the employee's share and the employer's matching share. The payroll engine typically combines these amounts for you. - Box 6: Total Taxes Before Adjustments
Add the amount from Box 3 (Federal income tax withheld) and the total taxes from Box 5e (Social Security and Medicare taxes). This represents the total tax liability before any adjustments or credits are applied. - Box 7: Current Quarter's Adjustments for Fractions of Cents
This box accounts for minor differences in tax calculations caused by rounding. Even small discrepancies in Social Security or Medicare tax totals across multiple payrolls can create a mismatch, which is reconciled here. - Box 8: Fractions of Cents
Enter the total adjustments related to rounding differences for Social Security and Medicare tax calculations. The payroll engine will usually calculate these automatically based on payroll processing totals. - Box 9: Sick Pay Adjustments
Record any adjustments for taxes on sick pay issued by third-party payers, such as an insurance company. If a third party handles payments directly to employees, they are responsible for reporting and paying the taxes. However, employers may need to reconcile these amounts here. - Box 10: Tips and Group-Term Life Insurance
This box is used to report uncollected Social Security and Medicare taxes on tips and group-term life insurance premiums paid for former employees. Ensure this information aligns with any reports from your payroll system regarding benefits provided to former workers. - Box 11: Total Adjustments
Add together the adjustments from Boxes 8, 9, and 10. This box reflects the total adjustment amount that modifies the taxes calculated in Part 1. - Box 12: Qualified Small Business Payroll Tax Credit for Increasing Research Activities
Enter the amount of payroll tax credit claimed for research and development expenses by a qualified small business. This information is typically derived from Form 8974, which the employer must complete separately. - Box 13: Total Taxes After Adjustments and Credits
Subtract the credits and adjustments from the total taxes in Box 6. This represents the employer’s final tax liability for the quarter.
Box 14: Total Deposits
Enter the total amount of tax deposits made during the quarter. Include any overpayment applied from a previous quarter as well as current payments submitted. This box should match the deposits recorded in your payroll engine’s tax module. - Box 15: Balance DueIf the total taxes (Box 13) exceed the total deposits (Box 14), enter the remaining balance owed here. This amount is the employer’s responsibility to pay before the filing deadline.
- Box 16: Overpayment
If the total deposits (Box 14) exceed the total taxes (Box 13), this box reflects the overpayment. Employers must indicate whether they prefer the overpayment to be refunded or applied to the next quarter’s tax liability.