When you pay an employee, part of the paycheck never belongs to either of you. Federal income tax withheld from the employee, the employee's share of Social Security and Medicare, and your matching share as the employer are all owed to the Treasury from the day of the payroll. Form 941 is the quarterly report of those amounts. The deposits are the actual payments, and they run on a different, faster calendar than the form.
What the 941 reports
- Total wages, tips and other compensation paid in the quarter.
- Federal income tax withheld from those wages.
- Social Security and Medicare wages and the tax on them, both the employee share and the employer match.
- Adjustments for sick pay, tips and rounding.
- Total deposits made during the quarter, and whether there is a balance due or an overpayment.
It is due the last day of the month after each quarter ends: April 30, July 31, October 31 and January 31. An employer who has deposited everything on time gets a short grace period. The form is filed even for a quarter with no wages, until you tell the IRS you have stopped paying employees.
Deposits run ahead of the form
You do not wait for the quarter to end to pay. The IRS assigns each employer a deposit schedule based on how much tax it reported in a lookback period. New and small employers are usually monthly depositors: taxes for wages paid in a month are due by the fifteenth of the next month. Employers whose liability crosses a threshold become semiweekly depositors, paying within a few business days of each payroll. A very small employer with a tiny quarterly liability may be allowed to pay with the return. All deposits go through the Electronic Federal Tax Payment System; paper coupons no longer exist.
Withheld payroll tax is called trust fund tax because you hold it in trust for the employee and the government. When it is not paid, the IRS can assess a personal penalty for the full unpaid amount against anyone responsible for paying it: the owner, an officer, sometimes a bookkeeper. An LLC does not shield you from this one.
The Texas side
Texas has no state income tax withholding, so there is no state equivalent of the 941 for income tax. There is state unemployment tax. Employers register with the Texas Workforce Commission, file a quarterly wage report, and pay unemployment tax on each employee's wages up to an annual wage base at a rate the Commission assigns. New employers start at a set rate; the rate then moves with your claims history. The federal unemployment tax, reported annually on Form 940, sits on top of that.
A quarter, start to finish
- 01Run each payroll with correct withholding based on each employee's W-4.
- 02Deposit the federal taxes on your assigned schedule through EFTPS.
- 03After the quarter ends, file Form 941 reconciling wages, tax and deposits.
- 04File the Texas Workforce Commission wage report and pay state unemployment tax for the same quarter.
- 05In January, file Form 940 for federal unemployment, issue W-2s, and file them with the Social Security Administration.
Frequently asked questions
I only have one part-time employee. Does all of this still apply?
Yes. The forms are the same for one employee as for fifty; only the deposit schedule and the amounts are smaller.
What if I paid a worker cash and never withheld anything?
If that worker was an employee, the taxes are still owed, and the employer is generally liable for the amounts that should have been withheld. Bring the records and we will work out how to correct it. The cost goes up the longer it waits.
Can I file the 941 myself?
You can. Most owners who try it once hand it off, because the deposit timing is where the penalties live, and a payroll service or our office tracks that for you.
We run payroll for Midland businesses
Deposits, 941s, Texas Workforce filings and January W-2s are all part of our payroll service. Call (432) 257-7547 or come by 700 C Andrews Hwy in Midland. English and Spanish.
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