What is the Form 941 quarterly report?

We recently talked about the most common taxes, including payroll taxes (Social Security and Medicare). Today, I wanted to share about the Form 941 quarterly reports to better help you understand why these reports are so important.

First, let’s review. Payroll taxes are the taxes that every employee or self-employed person pays throughout the year, They are separate from income taxes. Both the employee and employer must pay these taxes, which are 6.2 percent each for Social Security and 1.45 percent each for Medicare. A person’s income taxes, on the other hand, are based on the amount of income they have and are paid in through their withholding. The employer is responsible for taking all of these taxes out of their employees’ paychecks.

As an employer, just because you take that money out of your employees’ paychecks doesn’t mean you get to keep it! When you submit the Federal Form 941 each quarter, that is how you officially designate how much money fits in each category. In other words, the 941 tells how much of the total amount submitted during the quarter was for Social Security, how much for Medicare, and how much for withholding.

The IRS comes down hard on companies that try to cheat the system by not paying the full amount of payroll tax collected. The money does not belong to you as a company just because you collected it! It belongs to the employees whom you withheld it from. If you use it for yourself, you are, in effect, stealing.

When deciding how much to budget for a new employee, it’s important to factor in the employer-paid Social Security and Medicare taxes. These taxes are paid in addition to the employee’s salary. So, an employee making $50,000 annually actually costs the employer $53,825 (based on the 6.2 percent plus the 1.45 percent times the $50,000).

Let me help!

Whew! That was a lot of detail! Trying to keep track of how much payroll and income taxes you must pay plus filing all the right reports on that information can be a pain. Good news! I love doing that stuff. Let me help save you time and headaches by managing your bookkeeping, which will leave you to do what you love, which is run your business!