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Lesson 8, Filing Form 941
Slide 1
Welcome to this presentation.
I’ve a few announcements before we get started.
The information contained in this presentation’s current as of the day it was
presented, and shouldn’t be considered official guidance.
Any stories, names, characters, and incidents portrayed in this production
are fictitious. No identification with actual persons (living or deceased),
places, buildings, and products is intended or should be inferred.
This program will be maintained in accordance with federal recordkeeping
laws.
Now let’s get started.
Our topic is payroll taxes.
Slide 2
In this lesson, we’ll concentrate on filing the proper employment tax return
with the IRS to report the wages paid to employees and the related taxes
withheld from paychecks.
Slide 3
Publication 15, Employer’s Tax Guide, explains your responsibilities as an
employer.
It includes how to file and report employment taxes.
A new pub is released each year. You should download a current version
at the beginning of the year and review “What’s New” for any changes.
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Slide 4
We previously covered income tax withholding as well as social security
and Medicare rates you need to figure the taxes to withhold and match
from each paycheck.
We discussed income tax withholding in Lesson 5. You learned how to use
a W-4 form provided by the employee and the withholding tables in Pub 15
to determine the correct amount of federal income tax to withhold.
In Lesson 6, we looked at social security and Medicare tax obligations. You
learned there’s a tax to withhold from the employee and a matching amount
provided by you, the employer.
In Lesson 7, we discussed federal tax deposits. You learned tax deposits
must be made according to a deposit schedule and they must be made
electronically through the Electronic Federal Tax Payment System or
EFTPS.
Slide 5
In this lesson, you’ll determine whether you’re required to file a Form 944 or
Form 941.
Then you’ll learn what’s reported on Form 941, how to complete the form
and when to file.
Slide 6
It’s important to recognize the difference between deposits and
employment tax forms.
You pay taxes by making a deposit, but you report the taxes paid by filing
an employment tax return. Both are required. One without the other will
lead to penalties and IRS notices.
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Slide 7
How do you tell the IRS how much payroll tax you withheld, matched, and
deposited?
You’ll file one of the following:
• Form 941, Employer’s QUARTERLY Federal Tax Return
• Form 944, Employer’s ANNUAL Federal Tax Return
Remember, Form 941 is filed every quarter.
Form 944 is filed once a year.
Slide 8
What’s reported on employer’s federal tax returns?
Everything related to wages paid to your employees, including:
• Total wages paid
• Federal income tax withheld
• Social security tax (for both the employees’ and employer’s shares)
• Medicare tax (again, for both the employees’ and employer’s shares)
• And total deposits
Slide 9
Here’s a 2016 Form 944, Employer’s ANNUAL Federal Tax Return.
• Line 1 asks for total wages paid.
• Line 2 wants federal income tax withheld.
• Line 4a and 4c includes social security and Medicare wages
respectively along with the related tax for both the employees’ and
employer’s shares.
• Total deposits are reported on Line 8.
Who must file Form 944?
The IRS will notify you in writing if a Form 944 needs to be filed.
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Slide 10
Form 944’s designed so the smallest employers will file and pay
employment taxes once a year.
These employers may be notified to file Form 944 when their annual liability
for social security, Medicare, and withheld income taxes are $1,000 or less.
If the IRS asks you to file Form 944, then file it even if your tax liability for
the year exceeds $1,000.
Slide 11
But what if you’d rather file Form 941 instead?
Unless you contact the IRS to request to file quarterly Forms 941, you must
file Form 944 (if notified to do so).
To request to file quarterly Forms 941 to report your social security,
Medicare, and withheld federal income taxes for the calendar year, call the
IRS at 1-800-829-4933 between January 1 and April 1, or send a written
request postmarked between January 1 and March 15.
Written requests for Indian Tribal Governments should be sent to:
Department of Treasury
Internal Revenue Service
Ogden, UT 84201-0038
If your request is granted, the IRS will send you a written notice your filing
requirement has changed. If you don't receive this notice, you must file
Form 944 for the calendar year.
Slide 12
Don’t file Form 944 if you didn’t receive notification from the IRS to use
Form 944 or you’re an agricultural employer required to file Form 943 or
use Schedule H of Form 1040 for household employees.
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Slide 13
If the IRS didn’t send you a letter telling you to file Form 944, you’ll need to
file Form 941
Here’s a 2016 Form 941, Employer’s Quarterly Federal Tax Return.
Line 2 asks total wages paid.
Line 3 is for federal income tax withheld.
Line 5a and 5c includes social security and Medicare wages respectively,
along with the related tax for employees’ and employer’s shares.
Total deposits are reported on Line 11.
Slide 14
Entries should be made on the Form 941 as follows to enable accurate
scanning and processing.
• Use 10-point Courier font (if possible) Portable Document Format
(PDF) forms on IRS.gov have fillable fields with acceptable font
specifications.
• Don’t enter dollar signs and decimal points.
• Report dollars to the left of the preprinted decimal point and cents to
the right.
• Commas are optional.
• Leave blank any data field with a value of zero (except lines 1, 2, and
10).
• Enter negative amounts using a minus sign (if possible). Otherwise
use parentheses.
• Enter your name and EIN on all pages and attachments.
• Staple multiple sheets in the upper left corner when filing.
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Slide 15
Review Form 941 for errors before filing, even if your accounting software
generated it. Remember, the output of any payroll software’s dependent
upon the input.
Some software allows electronic filing (usually for an additional fee). Check
with your software provider if your return can be filed electronically.
If you can’t file electronically, mail a paper Form 941. The return for mailing
shouldn’t have any watermarks like “copy” or “don’t file.”
Slide 16
Where do you mail the completed Form 941?
There’s a special filing address for Indian tribal governmental entities. If you
are filing without a remittance check, send the signed form to Ogden, Utah.
If you’re filing with a remittance check, send the check and signed form to
Hartford, CT. Both addresses can be found on page 5 of the Form 941
instructions.
Slide 17
What are the due dates for Forms 941?
Since Forms 941 are filed quarterly, the due date for each is the last day of
the month following the end of the quarter.
So the first quarter ending March 31 is due the last day of April. The
second quarter ending June 30 is due the last day of July and so on.
If any of these due dates fall on a Saturday, Sunday, or legal holiday, you
have until the next business day.
For 2016, July 31 fell on a Sunday, so the due date was the next business
day, Aug. 1.
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For 2017, Apr. 30 fell on a Sunday, so the due date was the next business
day, May 1.
A return is considered timely filed if it’s postmarked no later than the due
date.
Slide 18
Now, let’s walk through an explanation and completion of Form 941. After
explaining each section, we’ll complete the Form 941 with figures shown on
this slide.
Tribe of ABC’s a monthly schedule depositor and only issues paychecks
once a month. Paydays were Jan. 31, Feb. 29, and Mar. 31. Their activity
for the first quarter’s summarized on this spreadsheet with columns for the
pay period, employee count, gross wages, social security wages, Medicare
wages, income tax withholding, monthly liability, and deposit amounts
along with due dates.
Slide 19
The entity section of Form 941, Employer’s Quarterly Federal Tax Return is
shown. The employer needs to be careful completing this section.
First, we complete the EIN for the entity. A unique nine-digit EIN was
assigned to your tribal government or tribal enterprise.
To ensure businesses comply with federal tax laws, the IRS monitors tax
filings and payments by using a numerical system to identify taxpayers.
Use the proper EIN when you file any forms with the IRS.
Your business should have only one EIN. If you’ve more than one and
aren't sure which to use, write to the IRS office where you file your return
using the without a payment address under “where you should file”, as
explained on slide 16, or call the IRS at 1-800-829-5500.
Make sure the EIN on the form you file exactly matches the one the IRS
assigned your entity. Filing Form 941 with an incorrect EIN, or using
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another business's EIN, may result in penalties and delays in processing
your return.
Next, enter the business legal name you used when you applied for your
EIN on Form SS-4.
For example, if the name associated with your EIN’s Tribe of ABC, that’s
what you enter.
Don’t use ABC Tribal Council or any other variation you may be known as.
If you have a trade name, enter Tribe of ABC on the name line and ABC
Tribal Council on the trade name line.
Leave the trade name line blank if it’s the same as your entity.
Next, complete the address, city, state and zip code.
What quarter are you filing?
Under Report for this Quarter of 2016 at the top right of Form 941, check
the appropriate box of the quarter for which you are filing. In our example,
we’re completing Quarter 1.
Now let’s discuss Part I, Line 1, “Number of employees who received
wages, tips, or other compensation for the pay period including...”
As seen on the form, it then lists four scenarios – one for each quarter.
Note that the 12th day of the 3rd month of each quarter’s listed.
We circled Mar. 12 (Quarter 1) because in our example for the 1st quarter,
we’re being asked for the number of employees on our payroll for the pay
period including March 12. We’ll not include employees in non-pay status.
We only count the people who received a paycheck.
Let’s look at possible scenarios for the pay period that included March 12.
If we have weekly paydays, our pay periods may be
• March 5-11 with payday on March 11
• March 12-18 with payday on March 18
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Since March 12 is included in March 12-18 Pay Period, we’d count how
many employees received a paycheck on March 18.
If we’ve semimonthly paydays, our pay periods may be March 1-15 with
payday on March 15. Since March 12 is included in this pay period, we
count how many employees received a pay check on March 15.
In our example, only three people received paychecks during the month of
March. Thus, we report 3 on Line 1.
Slide 20
See Part I, Lines 2-6, of Form 941.
First, let’s discuss and complete lines 2 and 3.
Line 2 is Wages, Tips, and Other Compensation. Enter amounts on Line 2
that would also be included in Box 1 of your employees' Forms W-2.
This includes pay you give to an employee for services performed. The pay
may be in cash or in other forms. It includes salaries, vacation allowances,
bonuses, commissions, and taxable fringe benefits.
Tribal council member pay would be included on Line 2.
For more information on what constitutes taxable wages, refer to the
instructions for Form W-2, Publications 15, 15-A, and 15-B.
Line 3’s Federal Income Tax Withheld from Wages, Tips, and Other
Compensation. Enter the federal income tax you withheld from your
employees on this quarter's wages.
Referring to the summary from Tribe of ABC, we look to the gross wages
and income tax withheld columns and enter the totals on lines 2 and 3,
respectively. Gross wages are $14,390 while income taxes withheld are
$617.
Next, let’s discuss and complete lines 5a through 6.
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First, column 1 of lines 5a, 5c and 5d, wants wage amounts. Line 5b wants
tips.
On Line 5a, enter the taxable social security wages paid. Here you enter
the total wages, sick pay, and taxable fringe benefits subject to social
security taxes you paid to your employees during the quarter.
Enter the amount before deductions. Don't include tips on this line. As we
learned in Lesson 6, there’s a wage limit for social security wages and tips
for each employee.
The IRS publishes the current year’s limit in Pub 15. For 2016, the limit was
$118,500. Stop entering an employee's wages on Line 5a when the
employee's taxable wages (including tips) reach $118,500 for the year. For
information on types of wages subject to social security taxes, see section
5 of Pub 15.
Report taxable social security tips on Line 5b. Enter all tips your employees
reported to you during the quarter, even if you weren’t able to withhold the
employee tax of 6.2%. For more information on tips, see section 6 of Pub.
15.
For Line 5c, Taxable Medicare Wages & Tips, enter all wages, tips, sick
pay, and taxable fringe benefits that are subject to Medicare tax. Unlike
social security wages, there’s no limit on the amount of wages subject to
Medicare tax.
Don’t include a tribal council member’s pay on lines 5a or 5c.
Line 5d will apply only if you have paid wages subject to additional
Medicare tax withholding.
As you learned in Lesson 6, employers must now withhold 0.9% additional
Medicare tax on an individual’s wages paid more than $200,000 in a
calendar year. This is an employee only tax. There’s no employer match for
the additional Medicare tax.
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Slide 21
This example from Lesson 6 illustrates how the additional Medicare tax
withholding calculation works. This employee’s wages didn’t exceed
$200,000 until November. Therefore, you wouldn’t have an entry on line 5d
until the 4th quarter.
Based on this example, you’d enter $22,240 on line 5d column 1 and
$200.16 would be the tax reported on 5d column 2 on the fourth quarter’s
return.
Slide 22
Next, calculate the tax amounts for column 2, lines 5a through 5d, by
applying a rate to the corresponding amounts reported in column 1.
On line 5a and 5b, multiply the wages (or tips) in column 1 by .124 and
enter the result in column 2. “.124” is the employee rate for social security
tax plus the employer rate, .062 +.062 = .124.
On Line 5c, multiply the wages & tips in column 1 by .029 and enter the
result in column 2. “.029” is the employee rate for Medicare tax plus the
employer rate, .0145 +.0145 = .029.
On Line 5d, we multiply the wages & tips subject to additional Medicare tax
withholding in column 1 by .009 and enter the result in column 2. “.009” is
the employee rate for additional Medicare tax withholding.
Referring to the summary from Tribe of ABC, we look to the social security
wages and enter the column total $13,350 on lines 5a column 1 and
multiply it by .124. The resulting tax of $1,655.40 is entered in column 2.
Tribe of ABC didn’t have any tipped employees, so 5b is left blank.
The summary for Tribe of ABC shows Medicare wages of $13,350 so that’s
what is put on lines 5c column 1 and multiply it by .029. The resulting tax of
$387.15 is entered in column 2.
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Tribe of ABC didn’t have any wages & tips subject to additional Medicare
tax withholding, so 5d is left blank.
5e’s merely a summation of column 2 entries for line 5a through 5d.
5f. Section 3121(q) Notice and Demand—Tax Due on Unreported Tips may
apply to employers with tipped employees. The IRS issues a Section
3121(q) Notice and Demand to advise an employer of the number of tips
received by employees who failed to report or underreported tips to the
employer. If applicable, you enter the tax due from your Section 3121(q)
Notice and Demand on line 5f.
For line 6, Total Taxes before Adjustments, simply add lines 3, 5e and 5f.
When we add column 2 for lines 5a through 5d, we get 2,042.55 for line 5e.
Tribe of ABC didn’t have any tipped employee, so 5f is left blank.
We entered 2,659.55 on Line 6 after adding lines 3, 5e, and 5f.
This completes line 2-6, but before continuing to Line 7, we’ll go to page 2
and complete Part 2.
Slide 23
On Part 2, you need to explain your deposit schedule and the tax liability
for the quarter.
First, don’t forget to complete to top of page two. Enter the name and EIN
of the entity.
• Line 14 needs an entry and there are three choices.
• Check the 1st box if line 10 on page 1 will be less $2,500.
• Check the 2nd box if you’re a monthly schedule depositor.
• Check the 3rd box if you’re a semiweekly depositor. Please note, for
semiweekly depositors, it instructs you to complete Schedule B and
attach it to Form 941.
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If you’re a monthly depositor, report your monthly liabilities in Month 1, 2,
and 3. The total for these three months must equal Line 10.
Let’s complete this section for Tribe of ABC.
First, remember to include the entity’s name and EIN.
Next, we’ve included the respective monthly liabilities as shown on our
summary sheet. The total liability for the quarter’s $2,659.56.
Please note the fine print next to the total liability for quarter. It says total
must equal Line 10.
Slide 24
We’re now on page 1 of Form 941’s tax section. Previously, we completed
the form through Line 6 and total taxes before adjustments were $2,659.55.
Line 7, current quarter's adjustment for fractions of cents, is next. Here you
enter adjustments for fractions of cents relating to the employee share of
social security and Medicare taxes withheld.
The employee share of amounts shown in column 2 of lines 5a–5d may
differ slightly from amounts actually withheld from employees' pay due to
the rounding of social security and Medicare taxes.
This is caused by adding or dropping fractions of cents when figuring social
security and Medicare taxes for each wage payment. This can be a positive
or negative amount.
Line 8, current quarter's adjustment for sick pay only applies if you’ve
engaged with a third party to handle sick pay for your organization.
If applicable, enter the adjustment for the employee share of social security
and Medicare taxes withheld and deposited by your third-party sick pay
payer. Refer to Pub 15-A for further information if this applies to your
organization.
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Line 9, current quarter's adjustments for tips and group-term life insurance,
applies if you’ve tipped employees and/or offered group-term life insurance
to former employees. For tipped employees, report on line 9 any
uncollected employee share of social security and Medicare taxes on tips.
For group-term life insurance, enter any uncollected employee share of
social security and Medicare taxes on group-term life insurance premiums
paid for former employees.
These adjustments would be a reduction in tax, so enter with a minus sign.
Refer to Pub 15-B for further information on group-term life insurance
provided to former employees and Pubs 15 and 531 for tip reporting.
For Line 10, total taxes after adjustments, combine the amounts shown on
lines 6 – 9 and enter the result on line 10.
Now, let’s complete this section. What’s entered, if anything, on Line 7 so
line 10 equals Line 14?
Line 6 was $2,659.55 cents, but on page 2, Line 14 was slightly different at
$2,659.56 cents.
If we enter one cent on Line 7, Line 14 will match Line 10.
If any of the adjustments on lines 7 – 9 decreases the total taxes shown on
Line 6, use a minus sign (if possible) to show the adjustment instead of
parentheses.
Doing so enhances the accuracy of our scanning software. For example,
enter “-.59” instead of “(.59).” However, if your software only allows for
parentheses in entering negative amounts, use them.
Slide 25
We’ve completed form 941 through Line 10 and total taxes after
adjustments is $2,659.56.
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For Line 11, enter the total deposits you have made for this quarter. If you
applied an overpayment from the prior quarter, also include it here.
Next, we compare lines 10 and 11.
If Line 10 is more than Line 11, enter the difference on Line 12 for the
balance due.
If Line 11 is more than Line 10, enter the difference on Line 13 to report the
overpayment.
Never make an entry on both lines 12 and 13.
You should only have a balance due if your total taxes for the current
quarter or preceding quarter are less than $2,500 and you didn’t incur a
$100,000 next day deposit obligation during the current quarter.
If you’re required to make federal tax deposits, pay the balance due using
EFTPS. Otherwise, you may pay the balance due on Line 12 by EFTPS,
credit card, debit card, check, or money order. You don't have to pay if Line
12 is under $1.
If you pay by EFTPS, credit card, or debit card, file your return using the
without a payment address under where should you file, and don't file Form
941-V, Payment Voucher.
If you pay by check or money order, make it payable to the United States
Treasury. Enter your EIN, Form 941, and the tax period on your check or
money order. Complete Form 941-V and enclose it with Form 941.
When the result of the comparison between lines 10 and 11 is an
overpayment, enter the difference on Line 13.
If you deposited more than the correct amount for the quarter, you can
choose to have the IRS either refund the overpayment or apply it to your
next return. Check only one box on Line 13.
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If you don't check either box or if you check both boxes, the IRS will apply
the overpayment to your account. We may apply your overpayment first to
any past due tax account that’s shown in our records under your EIN.
If Line 13 is under $1, we’ll send a refund or apply it to your next return only
if you ask us in writing.
Let’s complete this section for Tribe of ABC. What do we enter, on Line 11?
Do we have on a balance due or an overpayment?
The summary for Tribe of ABC shows total deposit made were $2,680 so
we enter that on Line 11. When we compare lines 10 and 11, we have an
overpayment of $20.44. We report this overpayment on Line 13 and check
one of the boxes. For our example, we’ve chosen to get a refund by
checking the send a refund box.
Slide 26
If you make a payment with your Form 941, use Form 941-V, Payment
Voucher.
Complete:
Box 1—Employer identification number (EIN).
Box 2—Amount of your payment.
Box 3—Tax period. Darken the circle identifying the quarter for which the
payment’s made. Darken only one circle.
Box 4—Name and address as shown on Form 941.
Enclose your check or money order made payable to United States
Treasury. Make sure to enter your EIN, Form 941, and the tax period on
your check or money order. Don't send cash. Don't staple Form 941-V or
your payment to Form 941 (or to each other).
Important reminder: Don’t use Form 941-V to make a federal tax deposit.
Making a deposit via EFTPS’s the only choice.
Slide 27
Let’s go to page 2 of Form 941 to complete parts 3, 4, and 5.
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In Part 3, tell us about your business, answer only those questions that
apply. If the questions don't apply, leave them blank and go to Part 4.
If you go out of business or stop paying wages, you must file a final return.
To tell the IRS that a Form 941’s your final return, check the box on Line 15
and enter the date you last paid wages in the space provided.
If you only hire employees seasonally, check the box on Line 16. A golf
course and ski resort are examples of businesses that may only hire
seasonal employees. Checking the box tells the IRS not to expect four
Forms 941 that year because you haven't paid wages regularly.
If you want to allow an employee, a paid tax preparer, or another person to
discuss your Form 941 with the IRS, check the yes box in Part 4, May We
Speak with Your Third-party Designee?
Enter the name, phone number, and the five-digit personal identification
number (PIN) of the designated person.
By checking yes, you authorize the IRS to talk to the person about any
questions we may have while processing your return. You also authorize
your designee to do all of the following:
• Provide any information missing from your return.
• Call us for information about processing your return.
• Respond to certain IRS notices you have shared with your designee
about math errors and return preparation.
The IRS won't send notices to your designee.
The authorization will automatically expire one year from the due date for
filing your Form 941.
You aren't authorizing your designee to bind you to anything (including
additional tax liability) or to otherwise represent you before the IRS. If you
want to expand your designee's authorization, see Pub. 947.
Your policies and procedures should declare who has the authority to sign
this form on behalf of the tribal entity.
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Complete all information in Part 5 and have the authorized person sign
Form 941. Items required besides the signature include printed name and
title, daytime phone number, and signing date.
Slide 28
Let’s use Tribe XYZ’s quarterly totals to prepare a 1st quarter Form 941 to
demonstrate what we’ve just learned.
XYZ’s activity for the first quarter is summarized by pay period on this
spreadsheet with columns for the pay period, employee count, gross
wages, social security wages, Medicare wages, income tax withholding,
payday liability, and deposits.
XYZ’s a monthly depositor and uses a semimonthly payroll period. Pay
days were the last day of each pay period. Deposits made by Tribe XYZ
are listed in the last column.
Slide 29
First, we complete the entity section and check the box for the quarter
we’re filing. Here we have checked the 1st quarter – January, February,
March.
For Part 1, Line 1, number of employees who received wages for the pay
period including March 12, we’ve entered 6. Referring to XYZ’s quarterly
summary, we only look at Pay Period March 1-15. Six people received
paychecks.
Slide 30
Continuing to Line 2, we report gross wages of $57,700. Remember, tribal
council member pay will be included on Line 2, but won’t be included on
lines 5a or 5c.
For Line 3, $3,988 of federal income tax was withheld from wages.
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In column 1, lines 5a, 5c and 5d, are asking for wage amounts. 5b is asking
for tips. While in column 2, lines 5a through 5d are asking for tax amounts
after a rate is applied to column 1.
For our exercise, only 5a and 5c are applicable. Based on the facts given,
taxable wages on lines 5a and 5c are $26,700. We simply multiply the
wages in column 1 by the respective rates of 12.4% or .124 and 2.9% or
.029 and enter the result in column 2.
$3,310.80 is the social security tax for Line 5a, column 2 and $774.30 is the
Medicare tax for line 5c, column 2.
5e is merely a summation of column 2 entries for Line 5a through 5d so
$4,085.10 goes here.
Finally, for total taxes before adjustments, we add lines 3, 5e and 5f and
enter $8,073.10 on line 6.
Before going on to Line 7, let’s go to page 2 and complete Part 2.
Slide 31
On page 2, Part 2, you need to explain your deposit schedule and the tax
liability for the quarter.
First, don’t forget to complete to top of the page with the name and EIN of
the entity.
Next, we’ve checked the box for monthly on Line 14 and entered the
monthly liabilities from our summary sheet. Since XYZ uses semimonthly
payroll periods, we added the two liabilities together for each month. The
total liability for the quarter is
$8,073.12.
The fine print next to the total liability for quarter reminds us the total must
equal Line 10. When we move back to page 1, remember Line 10 should
be $8,073.12.
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Slide 32
We’re now on page 1 of Form 941’s tax section. We completed the form
through Line 6 and total taxes before adjustments was $8,073.10.
As just calculated on Line 14, Line 10 should be $8,073.12 so it agrees with
Line 14. So, what do we need on Line 7 for current quarter’s adjustment for
fractions of cents?
We need two cents. Now Line 10 agrees with Line 14.
Slide 33
We need to complete the payment section and see if we’ve a balance due
or an overpayment.
The summary for XYZ shows total deposit made were $7,623.12, so we
enter that on Line 11.
When we compare lines 10 and 11, we’ve an under payment of $450. We
report this balance due on Line 12.
The Form 941 is complete for exercise #1. Now an authorized person
should review it for accuracy then sign, date, and mail.
The balance due on Line 12 of $450 should be paid immediately via a
deposit to minimize penalties. If you’re required to make deposits and
submit a check with Form 941, you may be subject to a penalty.
Slide 34
Here are a few common errors to avoid.
First, don’t list your deposits on Line 14 of Form 941. The only place you
report deposits is on Line 11.
Report your liabilities on Line 14. As you will recall from Lesson 7, your
liabilities are comprised of five parts.
• Employees’ withheld income tax
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• Employees’ withheld social security tax
• Employees’ withheld Medicare tax
• Employer’s contribution to social security tax
• Employer’s contribution to Medicare tax
Ideally, the liabilities and deposits will be the same amount, but life
happens and mistakes are made. If a deposit was overlooked or
miscalculated, the numbers won’t agree.
Second, don’t enter a large number on Line 7 of Form 941. By definition,
fractions of cents are small numbers. If your fraction of cents adjustment is
more than $1, something’s wrong.
Slide 35
In the exercise we just completed, if the deposits were incorrectly used to
complete Line 14, the result on Line 14 would be $7,623.12 instead of
$8,073.12.
Slide 36
If Line 14 is incorrect, Line 7 will be wrong. Fractions of cents are small
numbers. A fraction of cents adjustment of -449.98 should sound alarms
that something’s wrong.
If Line 7 is more than $1.00 (+ or -), you made an error, need to find it and
make corrections.
Slide 37
Here are some questions to consider for errors on Line 7 and why lines 10
and 14 don’t equal:
• Were deposits listed on Line 14 instead of liabilities?
• Were there any computational errors on Form 941?
• Were the amounts from source documents carried over correctly?
• Were there any addition errors?
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• When there was a tax computation, were there errors in multiplying
the rates?
• Were the correct rates applied?
o You should double check amounts on the following 941 lines.
Federal income tax withheld on Line 3
Lines 5a – 5d Wages in column 1
Taxes in column 2 on Lines 5a – 5d
Liabilities on Line 14
• Were there miscalculations during a specific pay period? You may
have to review the detail by pay periods to discover errors.
• Were tax rates applied correctly?
• Was an incorrect tax rate applied?
• Was no tax rate applied when it should have been?
• Was a tax rate applied when not applicable?
• Were any checks issued manually and not included in the payroll
detail?
• If there are multiple programs or departments that keep their own
payrolls, were all departments included in the payroll summary and
included correctly?
Slide 38
When do you file a Schedule B with Form 941?
You must complete Schedule B (Form 941) if you’re a semiweekly
depositor.
Let’s quickly recap the rules for semiweekly depositors discussed in Lesson
7 to see who must file a Schedule B with Form 941.
If the total taxes during your lookback period exceed $50,000, you’re a
semiweekly depositor.
However, don’t complete Schedule B if your tax liability for the quarter’s
less than $2,500.
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Slide 39
On Form 941 page 2, Part 2, explain your deposit schedule.
When the box for semiweekly schedule depositor applies, you’re instructed
to complete Schedule B and attach it to Form 941.
The total liability for the quarter must equal Line 10.
Slide 40
Here’s a first look at Schedule B (Form 941), Report of Tax Liability for
Semiweekly Schedule Depositors.
The form’s divided into three months for each quarter.
If you are filing the 1st quarter, then:
• Month 1 is January
• Month 2 is February and
• Month 3 is March
Furthermore, there are 31 numbered spaces for each month. There should
be an entry in these numbered spaces for any day wages were paid. Enter
the payday’s tax liability on the numbered space that corresponds to the
date wages were paid.
If you’re a semiweekly depositor, complete Schedule B (Form 941). If you
fail to complete and submit Schedule B (Form 941), the IRS may assert
deposit penalties based on available information.
Slide 41
The IRS uses Schedule B to determine if you’ve deposited your federal
employment tax liabilities on time.
If you don’t properly complete and file your Schedule B with Form 941, the
IRS may propose an averaged failure-to-deposit penalty.
See Deposit Penalties in section 11 of Pub.15 for more information.
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Slide 42
In the next few slides, we’ll walk through how the Schedule B’s completed.
At the top of Schedule B, enter your EIN and name.
Make sure they exactly match the name of your business and the EIN that
the IRS assigned to your business.
The name and EIN must also agree with the name and EIN shown on the
attached Form 941.
Enter the calendar year that applies.
Under Report for this Quarter, check the appropriate box of the quarter for
which you’re filing this schedule.
Make sure the quarter checked on the top of the Schedule B matches the
quarter checked on your Form 941.
Slide 43
Write your daily tax liability on the numbered space that corresponds to the
date wages were paid and total each month with an entry in the box on the
right, Tax Liability for Month...
In our example, we had paydays in Month 1 on the 15th and the 31st. Our
tax liabilities were $1,224.30 and 1,283.90, respectively.
We then added all entries in Month 1 and entered the total $2,508.20 in the
box Tax Liability for Month 1.
Repeat the same for months 2 and 3.
Slide 44
In our example, we had paydays in Month 2 on Feb.15 and 28. Our tax
liabilities were $1,389.60 and $1,667.60, respectively.
We added all entries in Month 2 and entered the total $3,057.20 in the box
Tax Liability for Month 2.
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Slide 45
In our example, we had paydays in Month 3 on the 7th, 15th, and 31st. Our
tax liabilities were $179.07, $1,542.25 and $2,541.98, respectively.
We then added all entries in Month 3 and entered the total $4,263.30 in the
box Tax Liability for Month 3.
Slide 46
Once all the monthly detail has been entered and totaled, fill in your total
liability for the quarter by adding tax liabilities for Month 1, Month 2, and
Month 3.
This total must equal Line 10 on Form 941.
In our example, the total for the quarter is $9,828.70. Line 10 must equal
$9,828.70.
Slide 47
Here are the web references for the forms and publications identified during
the presentation.
• Pub 15, Employer's Tax Guide: A general discussion of taxable
wages
• Pub 15-B, Employer's Tax Guide to Fringe Benefits: A detailed
discussion for employers who provide fringe benefits to employees.
Use Pub 15-B to determine whether the benefits are taxable and, if
so, the amount to include in the employee's wages.
Slide 48
Review the web references for the forms and publications identified during
the presentation.
• Pub 15-A, Employer's Supplemental Tax Guide. Contains specialized
and detailed employment tax information supplementing the basic
information provided in Pub 15.
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• Form W-2, Wage and Tax Statement.
Slide 49
That concludes our lesson.
We learned:
• How to determine when a Form 944’s required
• What’s reported on Form 941
• How to complete a Form 941 for monthly and semiweekly depositors
• The due dates for employment tax returns
Thank you.