Department of the Treasury Instructions for Form 941 Internal Revenue Service

(Rev. January 2004)

Employer’s Quarterly Federal Tax Return

Section references are to the Internal Revenue Code unless otherwise noted.

filed Form 941 by electronic or TeleFile methods, do not Items To Note also file a paper Form 941. For information about filing

Form 941 electronically, visit the IRS website at Electronic filing option. File Form 941 electronically www.irs.gov/efile. and receive proof of filing acknowledgement. Electronic

payment options may also be available. Visit the IRS Seasonal employers are not required to file for website at www.irs.gov/efile for details. quarters when they regularly have no tax liability because

Enhanced Third-Party Designee authority. The they have paid no wages. To alert the IRS that you will

authority given to a representative when a filer completes not have to file a return for one or more quarters during

the Third-Party Designee section of Form 941 has been the year, check the Seasonal employers box on line B

enhanced of Form 941 for each quarter. See section 12 of and is now revocable. Third-party designees will now be able to exchange information with the IRS Circular E (Pub. 15), Employer’s Tax Guide, for more

concerning Form 941. They may also request and information.

receive written tax information relating to Form 941, Note: Employers of the following categories of workers including copies of specific notices, correspondence, and do not usually file Form 941. account transcripts. The named third-party designee may • Household employees. See Pub. 926, Household now be any individual, corporation, firm, organization, or Employer’s Tax Guide, and Schedule H (Form 1040), partnership. As a result, the enhanced Third-Party

Designee authorization will be substantially equivalent to Household Employment Taxes.

Form 8821, • Farm employees. See Form 943, Employer’s Annual Tax Information Authorization. See

Third-Party Designee Federal Tax Return for Agricultural Employees, and on page 4 for details. Circular A (Pub. 51), Agricultural Employer’s Tax Guide. Revision to line 2 instructions. Filers should now use

amounts that would be entered in box 1 of Form W-2, Business reorganization or termination. If you sell or

Wage and Tax Statement, when entering wages, tips, transfer your business, you and the new owner must

and other compensation on line 2 of Form 941. See Line each file a return for the quarter in which the transfer

2—Total Wages and Tips, Plus Other Compensation occurred. Each should report only the wages it paid. A

on page 3 for details. change from one form of business to another, such as

Social security wage base for 2004. Stop withholding from sole proprietorship to partnership or corporation, is

social security tax after an employee reaches $87,900 in considered a transfer and requires a new EIN. See

section 1 of Circular E (Pub. 15). If a change occurs, taxable wages during 2004. (There is no limit on the

amount of wages subject to Medicare tax.) please attach a statement to your return that shows: new

owner’s name (or new name of the business); whether Zero Wage return. Beginning in April of 2004, all the business is now a sole proprietorship, partnership, or U.S.-based (domestic) taxpayers may file their “Zero

Wage” Forms 941 by telephone using the 941TeleFile corporation; kind of change (sale or transfer); and date of

change. When two businesses merge, the continuing firm system. Eligible filers must have had: (a) no withholding, must file the return for the quarter the change took place. (b) no federal tax deposits, and (c) no taxes to report for The other firm should file a final return. the quarter. Dial 1-800-583-5345 (toll free) to use

941TeleFile. Final return. If you go out of business or stop paying wages, file a final return. Be sure to check the final

General Instructions return box on line A and enter the date final wages were

paid in the area at the right. See the Instructions for

Forms W-2 and W-3 for information on the earlier dates Purpose of Form for the expedited furnishing and filing of Form W-2 when

a final Form 941 is filed.

Use Form 941 to report income tax that you withheld

from wages (including tips), distributions from Preparing the Form nonqualified pension plans (including nongovernmental The following will allow the IRS to process Form 941 section 457(b) plans), supplemental unemployment faster and more accurately: compensation benefits, and third-party payments of sick • Make dollar entries without the dollar sign and comma pay. Also use Form 941 to report social security and (0000.00). Medicare taxes. • Enter negative amounts in parentheses.

Telephone Help • File the Form 941 that has your preprinted name and

address. You can call the IRS toll free at 1-800-829-4933 to order

FTD coupons (Form 8109) and for answers to your When To File questions about completing Form 941, tax deposit rules, File starting with the first quarter in which you are or obtaining an employer identification number (EIN). required to withhold income tax or pay wages subject to Who Must File social security and Medicare taxes.

Employers who withhold income tax on wages, or who

must pay social security or Medicare tax, must file Form Quarter Ending Due Date

941 each calendar quarter. After you file your first Form Jan.-Feb.-Mar. March 31 April 30 941, you must file a return for each quarter, even if you Apr.-May-June June 30 July 31 have no taxes to report (but see the seasonal July-Aug.-Sept. Sept. 30 Oct. 31

employers and final return information below). If you Oct.-Nov.-Dec. Dec. 31 Jan. 31

Cat. No. 14625L
If you made deposits on time in full payment of your more than 10 withholding allowances or (b) exemption

taxes for a quarter, you have 10 more days after the from income tax withholding if their wages will normally

above due dates to file. Your return will be considered be more than $200 a week. For details, see section 9 of

timely filed if it is properly addressed and mailed Circular E (Pub. 15).

First-Class or sent by an IRS-designated delivery service

on or before the applicable due date. See Circular E Forms W-5

(Pub. 15) for more information on IRS-designated Each eligible employee wishing to receive any advance

delivery services. If the due date for filing a return falls on earned income credit (EIC) payments must give you a

a Saturday, Sunday, or legal holiday, you may file your completed Form W-5, Earned Income Credit Advance

return on the next business day. Payment Certificate. The employer’s requirement to

notify certain employees about the EIC can be met by Where To File giving each eligible employee Notice 797, Possible

See the back of Form 941 for the mailing address for Federal Tax Refund Due to the Earned Income Credit

your return. Do not send Form 941 or any payments to (EIC). See Circular E (Pub. 15) and Pub. 596, Earned

the Social Security Administration (SSA). Income Credit, for more information.

Your filing or payment address may have Employer Identification Number (EIN) changed from prior years. If you are using an If you do not have an EIN, apply for one on Form SS-4, CAUTION IRS-provided envelope, use only the labels and

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Application for Employer Identification Number. Get this envelope provided with this tax package. form from the IRS or the SSA. If you do not have an EIN

Depositing Taxes by the time your return is due, write “Applied For” and the

date you applied in the space shown for the number. If your net taxes (line 13) are $2,500 or more for the Form SS-4 has information on how to apply for an EIN by quarter, you must deposit your tax liabilities at an mail, fax, or by telephone. You may also apply for an EIN authorized financial institution with Form 8109, Federal online at www.irs.gov/smallbiz. Tax Deposit Coupon, or by using the Electronic Federal Note: Always be sure that the EIN on the form you file Tax Payment System (EFTPS). You may pay the taxes with Form 941 instead of depositing if your total taxes for matches the EIN assigned to your business by the IRS.

Do not show your social security number on forms calling the quarter (line 13) are less than $2,500 and you pay in for an EIN. Filing a Form 941 with an incorrect EIN or full with a timely filed return. See section 11 of Circular E using the EIN of another business may result in penalties (Pub. 15) for information and rules concerning Federal and delays in processing your return. tax deposits and to determine your status as a monthly

or semiweekly schedule depositor. Preprinted Name, EIN, and Address

Reconciliation of Forms 941 and W-3 If your preprinted name, EIN, or address on Form 941 is

Certain amounts reported on your four quarterly Forms not correct, cross it out and type or print the correct

941 for 2004 should agree with your Form W-2, Wage information. However, do not change any of the

and Tax Statement, totals reported on your 2004 Form preprinted information on your Form 941-V, Payment

W-3, Transmittal of Wage and Tax Statements, or Voucher.

equivalent magnetic media reports (Form 6559) filed with

the SSA. The amounts that should agree are: income

tax withholding, social security wages, social security Specific Instructions tips, Medicare wages and tips, and the advance earned

income credit payment. If the totals do not agree, the IRS

may require you to explain any differences and correct State Code

any errors. For more information, see section 12 of If you made your deposits by FTD coupon or by using an Circular E (Pub. 15). EFTPS bank account in a state other than that shown in

Penalties and Interest your address on Form 941, enter the state code for the

state where you made deposits or initiated EFTPS There are penalties for filing a return late and paying or transfers in the box provided in the upper left corner of depositing taxes late, unless there is reasonable cause. If the form. Use the Postal Service two-letter state you file or pay late, please attach an explanation to your abbreviation as the state code. Enter the code “MU” in return. There are also penalties for failure to: (a) furnish the state code box if you deposit in more than one other Forms W-2 to employees and file copies with the SSA or state. If you deposit or initiate EFTPS transfers in the (b) deposit taxes when required. (Do not attach an same state as shown in your address, do not make an explanation of why the return is late to Forms W-2 sent to entry in this box. the SSA.) In addition, there are penalties for willful failure

to file returns and pay taxes when due and for filing false Line A—Final Return

returns or submitting bad checks. Interest is charged on Check the box and enter the date final wages were paid taxes paid late at the rate set by law. in the space provided if you do not have to file Form 941

in the future. See also Final Return on page 1. A trust fund recovery penalty may apply if

income, social security, and Medicare taxes that Line B—Seasonal Employer CAUTION must be withheld are not withheld or are not paid.

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The penalty is the full amount of any unpaid trust fund Check this box if you are a seasonal employer

described on page 1. tax. This penalty may apply when these unpaid taxes

cannot be immediately collected from the employer or Line 1—Number of Employees business. The trust fund recovery penalty may be Enter the number of employees on your payroll during imposed on all persons who are determined by the IRS to the pay period including March 12 (on the be responsible for collecting, accounting for, and paying January-March calendar quarter return only). Do not over these taxes, and who acted willfully in not doing so.

See section 11 in Circ. E (Pub. 15) for more information. include household employees, persons who received no

pay during the pay period, pensioners, or members of the Forms W-4 Armed Forces.

Each quarter, send with Form 941 copies of any Forms An entry of 250 or more on line 1 indicates that you

W-4, Employee’s Withholding Allowance Certificate, must file Forms W-2 electronically or on magnetic media. received during the quarter from employees claiming: (a) Call the SSA at 1-800-772-6270 or access the SSA

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website at www.socialsecurity.gov/employer for more instructions for the adjustment for uncollected employee’s information on electronic or magnetic media filing. share of social security tax on tips.

Line 2—Total Wages and Tips, Plus Other An employee must report to you cash tips, including tips you paid the employee for charge customers, totaling Compensation $20 or more in a month by the 10th of the next month. Enter amounts on line 2 that would also be included in The employee may use Form 4070, Employee’s Report box 1 of your employees’ Forms W-2. See the of Tips to Employer, or submit a written statement. Instructions for Forms W-2 and W-3 for details. Do not include allocated tips on this line. Instead, If you get timely notice from your insurance carrier report them on Form 8027, Employer’s Annual concerning the amount of third-party sick pay that it paid Information Return of Tip Income and Allocated Tips. to your employees, include the sick pay on line 2. If you Allocated tips are not reportable on Form 941 and are not are an insurance company, do not include sick pay that subject to withholding of income, social security, or you paid to policyholders’ employees here if you gave the Medicare tax.

policyholders timely notice of the payments. See Pub.

15-A, Employer’s Supplemental Tax Guide, for details. Line 7a—Taxable Medicare Wages and Tips

Report all wages and tips subject to Medicare tax. Also Line 3—Total Income Tax Withheld include any sick pay and taxable fringe benefits subject Enter the income tax that you withheld on wages, tips, to Medicare tax. See section 5 of Circular E (Pub. 15) for taxable fringe benefits, and supplemental unemployment information on types of wages subject to Medicare tax. compensation benefits. An insurance company should There is no limit on the amount of wages subject to enter the income tax that it withheld on third-party sick Medicare tax. If none of the payments are subject to pay here. Medicare tax, check the box in line 8. Include all tips

that your employees reported during the quarter, even if Line 4—Adjustment of Withheld Income Tax you were not able to withhold the employee’s share of Use line 4 to correct errors in income tax withheld from Medicare tax (1.45%). However, see the Line 9 wages paid in earlier quarters of the same calendar instructions below.

year. You may not adjust or claim a refund or credit for

any overpayment of income tax that you withheld or Line 9—Adjustment of Social Security and deducted from an employee in a prior year. This is Medicare Taxes because the employee uses the amount shown on Form

W-2 as a payment when filing his or her income tax Current period adjustments. In certain cases, amounts

return. Because any amount shown on line 4 increases reported as social security and Medicare taxes on lines

or decreases your tax liability, the adjustment must be 6b, 6d, and 7b must be adjusted to arrive at your correct

tax liability. See section 13 of Circular E (Pub. 15) for taken into account on line 17, Monthly Summary of

Federal Tax Liability, or on Schedule B (Form 941), information on the following:

Employer’s Record of Federal Tax Liability. For details on • Adjustment for the uncollected employee share of

how to report adjustments on the record of Federal tax social security and Medicare taxes on tips.

liability, see the instructions for line 17 (on page 4) or the • Adjustment for the employee share of social security

instructions for Schedule B (Form 941). Explain any and Medicare taxes on group-term life insurance

adjustments on Form 941c, Supporting Statement To premiums paid for former employees.

Correct Information, or an equivalent statement. See • Adjustment for the employee share of social security

section 13 of Circular E (Pub. 15). and Medicare taxes withheld by a third-party sick pay

payer. Note: You may adjust income tax withholding for • Fractions of cents adjustment. quarters in earlier years only to correct an

administrative error. An administrative error occurs if Enter the adjustments for sick pay and fractions of

the amount you entered on Form 941 is not the amount cents in the appropriate line 9 entry spaces. Enter the

that you actually withheld. For example, if the total amount of all other adjustments in the “Other” entry

income tax actually withheld was incorrectly reported on space, and enter the total of the three types of

Form 941 due to a mathematical or transposition error, adjustments, including prior period adjustments

this would be an administrative error. The administrative (discussed below), in the line 9 entry space to the right.

error adjustment corrects the amount reported on Form Use parentheses (if possible) to show a net decrease to

941 to agree with the amount actually withheld from the the amounts reported on lines 6b, 6d, and 7b. Provide a

employees. supporting statement explaining any adjustments

reported in the “Other” entry space. Line 6a—Taxable Social Security Wages Prior period adjustments. Use line 9 to correct errors in

Enter the total wages subject to social security tax that social security and Medicare taxes reported on an you paid to your employees during the quarter. Also earlier return. If you report both an underpayment and an include any sick pay and taxable fringe benefits subject overpayment, show only the net difference. to social security tax. See section 5 of Circular E (Pub. Because any prior period adjustments shown on line 9 15) for information on types of wages subject to social increase or decrease your tax liability, the adjustments security tax. Enter the amount before deductions. Do not must be taken into account on line 17, Monthly Summary include tips on this line. Stop reporting an employee’s of Federal Tax Liability, or on Schedule B (Form 941). wages (including tips) after he or she reaches $87,900 For details on how to report adjustments on the record of for 2004. However, continue to withhold income and

Medicare tax for the whole year on wages and tips even Federal tax liability, see the instructions for line 17, later,

or the instructions for Schedule B (Form 941). when the social security wage base of $87,900 is

reached. See the Line 7a instructions for Medicare tax. If Explain any prior period adjustments on Form 941c.

none of the payments are subject to social security Do not file Form 941c separately from Form 941.

tax, check the box in line 8. Form 941c is not an amended return but is a statement

providing necessary information and certifications Line 6c—Taxable Social Security Tips supporting the adjustments on lines 4 and/or 9 of Form Enter all tips that your employees reported during the 941. If you do not have a Form 941c, you may file an

quarter until tips and wages for an employee reach equivalent supporting statement with the return providing

$87,900 in 2004. Do this even if you were not able to the required information about the adjustment(s). See

withhold the employee tax (6.2%). See the Line 9 section 13 of Circular E (Pub. 15).

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If you are adjusting an employee’s social security an overreported liability in a prior period) and it exceeds or Medicare wages or tips for a prior year, you your total liability for the month, do not enter a negative CAUTION must file Form W-2c, Corrected Wage and Tax amount for the month. Instead, enter “-0-” for the month

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Statement, with Form W-3c, Transmittal of Corrected and carry over the unused portion of the adjustment to Wage and Tax Statements. the next month.

For example, Pine Co. discovered on February 6, Line 12—Advance Earned Income Credit 2004, that it overreported social security tax on a prior (EIC) Payments Made to Employees quarter return by $2,500. Its Form 941 taxes for the 1st Enter any advance EIC payments that you made to your quarter of 2004 were: January $2,000, February $2,000, employees. Your eligible employees may elect to receive March $2,000. Pine Co. should enter “$2,000” in column part of the EIC as an advance payment. Eligible (a), “-0-” in column (b), “$1,500” in column (c), and the employees must expect to have a qualifying child and total, “$3,500,” in column (d). The prior period adjustment must give you a completed Form W-5 stating that they ($2,500) offsets the $2,000 liability for February and the qualify for the EIC. Once the employee gives you a excess $500 must be used to offset March liabilities.

signed and completed Form W-5, you must make the Since the error was not discovered until February, it does appropriate advance EIC payments. Advance EIC not affect January liabilities reported in column (a). payments are generally made from withheld income tax If excess negative adjustments are carried forward to and employee and employer social security and the next quarter, do not show those excess adjustments Medicare taxes. See section 10 of Circular E (Pub. 15) on lines 4 or 9 because line 17 column (d) must equal and Pub. 596. line 13. Instead, on your next quarter’s Form 941, report If the amount of your advance EIC payments exceeds the excess negative adjustments on lines 4 or 9 and your total taxes (line 11) for the quarter, you may claim a adjust (but not below zero) your line 17(a) liability. refund of the overpayment or elect to have the credit

applied to your return for the next quarter. Provide a Third-Party Designee. If you want to allow any statement with your return identifying the amount of individual, corporation, firm, organization, or partnership excess payment(s) and the pay period(s) in which it was to discuss your Form 941 with the IRS, check the “Yes” paid. See section 10 of Circular E (Pub. 15). box in the Third-Party Designee section of the return.

Line 15—Balance Due Also, enter the name, phone number, and any five

numbers that the designee chooses as his or her You do not have to pay if line 15 is under $1. personal identification number (PIN). The authorization Generally, you should show a balance due on line 15 applies only to the tax form upon which it appears. only if your net tax liability for the quarter (line 13) is less By checking the “Yes” box, you are authorizing the than $2,500. However, see section 11 of Circular E IRS to call the designee to answer any questions relating (Pub. 15) regarding payments made under the accuracy to the information reported on your tax return. You are of deposits rule. (Make certain that the entity area also authorizing the designee to: above line A on Form 941 is properly completed). • Exchange information concerning your tax return with If you fail to make deposits as required and the IRS and

instead pay the taxes with Form 941, you may be • Request and receive written tax return information subject to a penalty. relating to your tax return including copies of specific CAUTION

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notices, correspondence, and account transcripts. Line 16—Overpayment You are not authorizing the designee to receive any If you deposited more than the correct amount for a refund check, bind you to anything (including additional quarter, you can have the overpayment refunded or tax liability), or otherwise represent you before the IRS. If applied to your next return by checking the appropriate you want to expand the designee’s authorization or box. If you do not check either box, your overpayment will desire automatic issuances of copies of notices, see be applied to your next return. The IRS may apply your Pub. 947, Practice Before the IRS and Power of overpayment to any past due tax account under your Attorney. EIN. If line 16 is under $1, the amount will be refunded or The Third-Party Designee authorization automatically applied to your next return only on written request. expires one year from the due date (without regard to

Line 17—Monthly Summary of Federal Tax extensions) for filing your Form 941. If you or your

designee desire to terminate the authorization, a written Liability statement conveying your wish to revoke the Note: This is a summary of your monthly tax liability, not authorization should be submitted to the IRS service

of deposits made. If line 13 is less than $2,500, do not center where the return was processed. complete line 17 or Schedule B (Form 941). Who Must Sign Complete line 17 only if you were a monthly • Sole proprietorship—The individual owning the schedule depositor for the entire quarter and line 13 is business. $2,500 or more. (See section 11 of Circular E (Pub. 15) • Corporation (including an LLC treated as a for details on the deposit rules.) You are a monthly corporation)—The president, vice president, or other schedule depositor for the calendar year if the total principal officer. amount of your Form 941 taxes (line 11) reported for the • Partnership (including an LLC treated as a lookback period is not more than $50,000. partnership) or unincorporated organization—A The lookback period is the four consecutive quarters responsible and duly authorized member or officer having ending on June 30 of the prior year. The 2004 lookback knowledge of its affairs. period begins July 1, 2002, and ends June 30, 2003. • Single member limited liability company (LLC)

If you were a semiweekly schedule depositor treated as a disregarded entity—The owner of the

during any part of the quarter, do not complete limited liability company. CAUTION columns (a) through (d) of line 17. Instead, • Trust or estate—The fiduciary. !

complete Schedule B (Form 941). The return may also be signed by a duly authorized

Reporting adjustments on line 17. If your net agent of the taxpayer if a valid power of attorney has

adjustment during a month is negative (e.g., correcting been filed.

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