Payroll Taxes Explained: FICA, Withholding and More
From Tax Guide.
Tax Guide · Arab, Alabama
Payroll Tax Deposits and Form 941: How Employers Report and Pay
Employers deposit withheld payroll taxes on a schedule the IRS assigns and report them each quarter on Form 941. Here is how the two fit together.
The short answer
What is Form 941 and how does it relate to payroll tax deposits?
Form 941 is the quarterly report of the wages you paid and the payroll taxes you owe, while deposits are the payments you make toward that tax during the quarter.
The two work as a pair. You deposit money with the government regularly as you run payroll, then you file Form 941 at the end of the quarter to report the totals. The report is then reconciled with what you already deposited, and any small balance is paid or credited.
Getting the pairing right matters because the IRS matches your deposits to your return. If the two do not agree, expect a notice.
What is on it
What goes on the quarterly payroll return?
Form 941 reports wages paid to employees, federal income tax withheld, and both the employee and employer shares of Social Security and Medicare tax.
Each quarter you total these amounts from your payroll records and report them on the form. That is why accurate records matter: the return is only as good as the numbers underneath. Our guide to payroll taxes explained walks through what each tax is and who pays it.
- The number of employees and the total wages, tips and other pay.
- Federal income tax you withheld from employee paychecks.
- Social Security and Medicare taxes, including the employer's matching share.
- Your deposits during the quarter and any balance due.
When to pay
When are payroll taxes due, monthly or semiweekly?
Most employers are assigned to a monthly or semiweekly deposit schedule based on how much payroll tax they reported in an earlier look-back period.
The IRS tells you which schedule applies, and it can change from one year to the next as your payroll grows or shrinks. Very small employers may qualify to pay with the return itself instead of making deposits during the quarter, but the limits are set by the IRS, so we confirm the current rules each year.
A simple way to stay on track is to keep a calendar of deposit and filing dates that you update whenever the IRS changes your schedule, and to reconcile each quarter's payroll records to your deposits before you file. If a deposit was missed or made in the wrong amount, correcting it early and keeping proof is generally better than waiting for a notice to arrive.
Deposits are normally made electronically, through the Electronic Federal Tax Payment System or the online account the IRS provides for businesses. A deposit that is late, short or made the wrong way can trigger penalties, even when the money reaches the IRS a bit later.
Quick reference
Which payroll returns do most employers file?
Most small employers file Form 941 every quarter, Form 940 once a year, and the year-end W-2 forms.
Here is how the common federal payroll reports line up.
| Form | What it reports | How often |
|---|---|---|
| 941 | Wages, income tax withheld, Social Security and Medicare | Quarterly |
| 940 | Federal unemployment (FUTA) tax | Annually |
| W-2 and W-3 | Wages and withholding per employee, plus totals | Annually |
| 944 | A yearly version of the 941 for the smallest employers | Only if the IRS notifies you |
A general guide. The IRS decides which filing schedule applies to your business.
Avoiding trouble
What happens if I miss a payroll tax deposit or file Form 941 late?
Missing a deposit or a filing can bring penalties and interest, and the IRS takes payroll taxes seriously because they include money withheld from employees.
Withheld income tax and the employee share of Social Security and Medicare are held in trust for the government. When they go unpaid, the IRS may hold the people responsible for the business personally liable in some cases. That is a good reason to act quickly if you fall behind.
If you get a letter about a payroll deposit or a Form 941, do not ignore it, keep a copy, and call the office. Our tax representation service can review the notice, explain the options and respond to the agency on your behalf. For habits that keep you out of trouble, read payroll mistakes to avoid.
Alabama also has its own payroll filings, which we cover in Alabama withholding and unemployment tax.
How we can help
How Melton Tax Services can help with payroll deposits and Form 941
Our payroll and bookkeeping service can help you keep deposits and quarterly reports on schedule.
We can help with running payroll and the records that feed your returns. See our payroll and bookkeeping page, or start with how payroll works for a small business.
To talk about your situation, contact us or call 256-586-4635. We serve Arab and the surrounding area. Please do not send Social Security numbers or documents through this website. Bring them by the office or call us.
Answers
Questions about payroll deposits and 941
Who has to file Form 941?
Employers who withhold income tax or pay Social Security and Medicare wages generally file Form 941 every quarter. Household employers usually report differently, and the IRS may switch very small employers to an annual return.
Do I file Form 941 if I had no payroll in a quarter?
Usually yes, if you are still registered as an employer and have not told the IRS otherwise. A business that stops paying wages should ask the IRS how to close or adjust its filing so it does not receive late-filing notices.
How do I make a payroll tax deposit?
Deposits are normally made electronically through the Electronic Federal Tax Payment System or a business account with the IRS. Mailing a check is generally not how payroll deposits are made.
What is Form 940?
Form 940 reports the federal unemployment tax, or FUTA, which employers pay. It is filed once a year, separate from the quarterly Form 941. State unemployment tax is handled separately.
What if I find an error on a filed Form 941?
Employers correct errors with Form 941-X, which amends a filed quarterly return. Correct the error as soon as you find it, and keep a copy of the corrected form with your records.
Can the IRS change my deposit schedule?
Yes. The IRS assigns the schedule based on your earlier reporting, so it may change when your payroll changes. Watch for a notice, and check the schedule before each new year.
Read next
Related reading
Payroll Mistakes to Avoid and How to Fix Them
From Tax Guide.
W-2 and W-4 Forms for Employers
From Tax Guide.
How Payroll Works for a Small Business
From Tax Guide.
Payroll and Bookkeeping
A service Melton Tax Services provides.
Melton Tax Services
Questions about your taxes or your business?
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