Payroll – Filling Out Form 941 (step by step)
Each quarter (15th of January, April, June and September) employers must file Form 941 with the IRS outlining the withheld income taxes including all tips, wages, sick pays, unemployment benefits, etc., plus social security and Medicare taxes.
Total Office Manager makes this process easy for you. This topic will help you in filling out the form 941 in Total Office Manager. Just file one form. The following are step-by-step instructions for filling out form 941 in Total Office Manager.
- Select the correct year and quarter for the 941 you wish to fill out and print.
- Click the OK button. A 941 form should open.
- Complete the rest of the form according to the specific instructions shown below.
On top of the form there is a small box for seasonal workers. Check this only if you hire employees for a season like summer or winter. This way the IRS knows not to expect four Form 941’s from you.
Line 1 – Lists the number of employees you have.
Line 2 – Calculated for you and includes the total amount of wages and tips that you have paid to your employees. This doesn’t mean the amount of withheld income taxes, social security, and Medicare taxes. This also includes any kind of other compensations that you have given to your employees including money for lunches, parking spaces, and money paid to day care centers and dog kennels. This also includes any sick pay that you paid to your employees.
Line 3 – Calculated for you. This includes all the income tax that you have withheld from your employees. This includes tax collected on the wages that you have paid them, on the tips, money for lunches, parking spaces, massages, money paid to day care centers and dog kennels, etc.
Line 4 – Is where you list mistakes (if any) on other Form 941’s for the preceding quarters. For any adjustments that you need to make for the withheld income taxes, this is where you do it. You only report adjustments for the current calendar year, meaning for the quarters in this year, not the previous one. Don’t forget to take this into account on line 17, because your tax liability has either increased or decreased.
Line 5 – Calculated for you. This includes either the total amount of line 4 and 3, if you had additional withheld income tax to report, or minus line 4 and 3, if you had reported extra withheld income tax previously and needed to reduce the amount now.
Line 6 – Has four parts to it:
Line 6a – Calculated for you. All wages that are subject to the social security taxes are reported here. This doesn’t include the tips. Examples are wages paid to your employees, sick pay, money for lunches, parking spaces, and more.
Line 6b – Calculated for you.
Line 6c – Enter the tips that your employees have reported for this quarter that are subject to social security taxes. These are the tips that are reported to you by your employees. Tips that you have allocated to them need to be reported separately, not here.
Line 6d – Calculated for you. This includes tips made by your employees and reported to you by multiplying by .124 (12.4%).
Line 7 – Has two parts and both are calculated automatically by Total Office Manager:
Line 7a – Calculated for you and includes the amounts from lines 6a and 6c.
Line 7b – Calculated for you. This includes the number you got for line 7a and multiplied by .029 (2.9%). The amount you get is entered here automatically.
Line 8 – Calculated for you. This includes all the amounts from line 6b, 6d, and 7b. If the wages and tips were not subject to the social security taxes and/or Medicare taxes, then check the small box placed there.
Line 9 – This one can be a little complicated. Even though it’s very similar to line 4, here you are trying to adjust the social security and Medicare taxes for this quarter and the previous ones. The difference here is that you can also adjust the taxes for prior years. Adjustments are for the uncollected employee share of social security taxes and Medicare taxes on tips, the employee share of social security and Medicare taxes on group-term life insurance premiums paid for former employees, the employee share of social security and Medicare taxes withheld by a third-party sick pay payer, and fractions of cents involved. Sick pay adjustments and fractions of cents go into their allocated spaces. All the other adjustments go into the Other. This includes all prior period adjustments for prior quarters and years. Once again you have to take this into account for line 17 or schedule B. You need to explain all prior period adjustments that you report on line 9 of Form 941 on Form 941c. This is basically a statement supporting line 9. According to the IRS, you also need to file Form W-2c (Corrected Wage and Tax Statement) and Form W-3c, (Transmittal of Corrected Wage and Tax Statement).
Line 10 – Calculated for you. This includes line 8 and 9. If the number in line 9 is a positive one meaning you have increased your tax liability or you subtract line 8 and 9 if the number in line 9 is negative.
Line 11 – Calculated for you. Line 5 and line 10 are added together.
Line 12 – Enter the advance earned income credit amount provided to your employees. Employees only become eligible for this when they correctly fill out W-5 and give it to you. If this amount exceeds line 11 then you can either claim a refund for this quarter or let it rollover to the next (whenever you do need to provide the IRS with a written statement explaining the circumstances under which the amount exceeded the amount in line 11).
Line 13 – Calculated for you. This includes the amount that you get after you subtract line 12 from line 11. If this is over $1000, then it should equal line 17 on schedule B. Total Office Manager takes care of this for you but check it out for accuracy.
Line 14 – The amount that includes all the deposits that you have made in this quarter plus overpayment applied from prior quarters.
Line 15 – Calculated for you. Line 14 is subtracted from line 13. If you get a zero it means line 13 was more than $1000 and you made all the deposits on time for your taxes. You would only have a balance due here if their tax liability for this quarter was under $1000 on line 13. If the balance due is one dollar then you don’t owe IRS anything. If you pay your taxes with this form, be ready to get hit with penalties. Mostly late fees and fines.
Line 16 – Calculated for you. This is where you have to decide if you want your overpayment (whatever is left over after you subtract line 14 from line 13) to be refunded or rolled over to the next quarter. Also enter this overpayment on the appropriate line and don’t forget to check a box.
Line 17 – Calculated for you. This part does not have to be filled in if the amount on line 13 is less than $1000. If it’s over $1000, then the other requirement is that you have to be a monthly schedule depositor for the quarter. If you are a semiweekly schedule depositor then report your tax liability on schedule B. The taxes reported for a look back period (four consecutive quarters ending on June 30th of the previous year) should be under or equal to $50,000 for a monthly schedule depositor. Also, you should never enter a negative amount in any of the four columns. Instead, enter a zero. This occurs sometimes from correcting an over reported liability in a prior period. If excess negative adjustments are carried forward to the next quarter, don’t show them on line 4 and 9.