The Federal form 941

The Federal form 941 is the most intricate payroll tax form I've completed. You can see a sample of it at: http://www.irs.gov/pub/irs-pdf/f941.pdf?portlet=3

This form is used to reconcile payment of income and FICA taxes withheld from employees each quarter. Once you have been issued your FID #, you will start receiving a number of things from the IRS to help you make your tax payments. Often, when your tax liability is low at the end of the quarter, you can complete the 941 and remit payment at that time. More than likely, you will have to make payments every other week (bi-weekly) via the coupon booklet you receive from the IRS. This coupon booklet is nothing more than a packet of forms #8109-B which you complete and take to the bank with your payment. The bank receives your payment and coupon and deposits it into the Federal Reserve Account for you, using the information off the coupon. An example of the coupon can be found at http://www.irs.gov/pub/irs-pdf/f8109b.pdf. It should be pretty self-explanatory.

The coupon book should have your business information already printed on each form. You have to complete the information the IRS won't automatically have and take the completed coupon to the bank as a mentioned above. I have been away from this task for a while, so this can probably all be done by a draft by the bank from your account, online, without having to make the extra trip to the bank. The payment you are making with this coupon is calculated on gross wages your employees have earned and Federal income tax withheld. When you hire employees, they must fill out a form W-4 which specifies how much Federal income tax you are to withhold from their earnings. Once you have this completed form, the amount to be withheld can be found in a booklet you should receive from the IRS called the Circular E. There is a table in this booklet that you can use to find out how much to withhold for each employee's gross earnings. The FICA taxes withheld are two separate figures. One is for Social Security, calculated at 6.2% of gross wages. The other is for Medicare, calculated at 1.45% of gross wages. The total you pay with the coupon is a combination of all income tax withheld, FICA tax withheld AND a matching amount of FICA taxes. If $100.00 is withheld for FICA from employees, the employer also pays $100.00 as an expense. This should be included in how much will be needed for payroll taxes each week or pay period.

At the end of the quarter, you have a month to complete the 941 and submit it to the IRS by mail. The form summarizes the wages your employees RECEIVED (by check, cash or direct deposit) within the quarter. The total wages for all employees and the Federal income taxes withheld are shown and the gross wages are multiplied by the FICA percentages and listed also. There is a separate section for the monthly totals of the payments you have taken to the bank. If there is a difference, this must be paid, refunded or applied to future quarters. If there is a balance you have to pay, you must submit it with the form 941-V - payment voucher. There are additional items included on this form, such as EIC (Earned Income Credit) and similar items. Your accountant can give you more information about these. Once all of this is reconciled and the form is completed, it gets signed, dated and mailed to the IRS at an address specific for your state.

This got pretty lengthy. Write back and I'll reply to your questions.

Have a great weekend.