Employers are required to report employee wages, tips, and employment taxes through specific tax forms. Most businesses must file Form 941, Employer's Quarterly Federal Tax Return, while certain small businesses with lower tax liabilities may file Form 944, Employer's Annual Federal Tax Return. These forms cover employment taxes, including federal income tax withholding, Social Security, and Medicare taxes.
Form 941: Quarterly Federal Tax Return
Businesses are typically required to file Form 941 on a quarterly basis to report wages paid, tips received by employees, and applicable employment taxes. The filing schedule is as follows:
First quarter: January – March → Due by April 30
Second quarter: April – June → Due by July 31
Third quarter: July – September → Due by October 31
Fourth quarter: October – December → Due by January 31 of the following year
If you deposit all taxes on time, you are granted an additional 10 days after the due date to file. When a filing deadline falls on a weekend or legal holiday, you can submit the form on the next business day.
Form 944: Annual Federal Tax Return
Small employers with annual employment tax liabilities of $1,000 or less may be eligible to file Form 944 instead of Form 941. The annual deadline for Form 944 is January 31 of the following year. However, if you make full and timely deposits throughout the year, you have until February 10 to file.
To file Form 944, you must either:
Have been notified by the IRS to use Form 944, or
Have properly indicated your eligibility on Form SS-4, Application for Employer Identification Number (EIN).
If your tax liability increases beyond $1,000 during the year, you are still required to file Form 944 for that tax year. You cannot switch to Form 941 until the IRS notifies you of the filing requirement change.
Depositing and Reporting Employment Taxes
Employers must generally deposit employment taxes periodically rather than paying them when filing Form 941 or Form 944. The deposit schedule depends on your total tax liability:
Monthly schedule depositors report tax liabilities for each month in Part 2 of the forms.
Semiweekly schedule depositors report tax liabilities by date on Schedule B (Form 941) or Form 945-A for Form 944 filers.
For detailed rules on depositing taxes, refer to Publication 15 (Circular E), Employer's Tax Guide.
Adjustments and Corrections
You may need to adjust reported Social Security and Medicare taxes in certain cases, such as:
Fractions of cents: Minor rounding differences when calculating payroll.
Third-party sick pay: Adjusting for sick pay withheld by a third party, like an insurance provider.
Uncollected taxes on tips or life insurance premiums for former employees.
If you need to correct errors on previously filed forms:
Use Form 941-X to correct Form 941.
Use Form 944-X to amend Form 944.
Tax Calculation and Reporting
You are liable for employment taxes based on the payment date, not the pay period end date. For example, if you pay wages on October 1 for a pay period ending on September 24, the wages are reported in the fourth quarter (when paid), not the third quarter (when earned).
The total employment tax liability is calculated by combining:
Federal income tax withheld
Social Security and Medicare taxes
Adjustments and credits
If your net tax liability is $2,500 or more, you must complete the monthly or semiweekly tax liability section of the form.
Penalties for Late Deposits
Failure to properly deposit taxes may result in penalties ranging from 2% to 15% of the unpaid amount, depending on how late the deposit is.
Late deposit penalties apply if you pay taxes with your return instead of making timely deposits.
To avoid penalties, ensure you deposit taxes according to the schedule outlined in Publication 15.
Changing Filing Requirements
Employers who want to switch between quarterly (Form 941) and annual (Form 944) filing must request approval from the IRS. This process involves submitting a request and waiting for notification confirming the change.
Key Takeaway
Filing Form 941 or Form 944 ensures you report employee wages, tips, and taxes accurately. Make sure you comply with filing deadlines, deposit taxes on time, and follow correction procedures to avoid penalties. For more details, refer to Publication 15 and the IRS instructions for both forms.