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Overview of Form 940 vs 941

Updated on October 12, 2023 - 10:30 AM by Admin, TaxBandits

When it comes to running a business with employees, there are many different tax requirements to navigate and fulfill. Two essential forms that employers must become familiar with are Form 941 and Form 940. Both of these forms are crucial for reporting employees’ wages and taxes withheld and deposited with the IRS. In this comprehensive guide, we will explore the differences between Forms 941 and 940, as well as their purposes, specific filing requirements, and deadlines.

Table of Contents:

  1. What is Form 940?
  2. What is Form 941?
  3. Key Difference between 940 and 941
  4. When to file Form 940 vs 941?
  5. How do I file Forms 940 and 941 with TaxBandits?

1. What is Form 940?

940 Form is an IRS annual tax return used by employers to pay and report FUTA taxes. Federal Unemployment Tax Act (FUTA) is a federal law that provides funds to support individuals who are actively seeking employment but are currently unemployed.

FUTA taxes only apply to the first $7,000 of each employee's wages in a calendar year. This means that if an employee earns $10,000 in a year, you will only need to calculate the FUTA tax on the first $7,000. Any wages beyond this threshold are FUTA-exempt.

It's important to note that certain payments are excluded from the calculation of the $7,000 wage threshold. This typically includes payments made under state unemployment compensation laws and any payments made to a retirement plan on behalf of an employee. These exclusions reduce the overall FUTA tax liability for employers.

2. What is Form 941?

941 Form is also called the Employer’s Quarterly Tax Form, used by employers to report the Federal income tax withheld, social security tax, and Medicare tax (FICA taxes) for the employee’s paycheck. This form is also used to calculate the employer's share of Social Security and Medicare taxes.

Employers that pay wages that are subject to withholding must file Form 941 every quarter.

3. Key Difference between 940 and 941

The key differences between Form 940 and Form 941 are their purpose, filing frequency, and the employment taxes they pertain to:

Purpose

Form 940 (Employer's Annual Federal Unemployment Tax Return): This form is used to report and pay the federal unemployment tax (FUTA) liability, which helps fund unemployment benefits for workers who have lost their jobs. Employers use Form 940 to calculate and report their annual FUTA tax liability.

Form 941 (Employer's Quarterly Federal Tax Return): Form 941, on the other hand, is used to report and pay various employment taxes on a quarterly basis. It includes federal income tax withholding, Social Security tax, and Medicare tax, which are collectively known as payroll taxes.

Frequency of Filing

Form 940: Employers file Form 940 annually. It covers the entire calendar year and is typically due by January 31st of the following year (with an extended deadline of February 10th if all FUTA taxes have been deposited timely).

Form 941: Form 941 is filed quarterly, meaning employers must submit it four times a year. The
941 due dates are at the end of each calendar quarter (e.g., April 30th for the first quarter, July 31st for the second quarter, October 31st for the third quarter, and January 31st for the fourth quarter).

Taxes Reported

Form 940: This form deals exclusively with the federal unemployment tax (FUTA), which is not withheld from employees' wages. Employers pay FUTA tax based on the wages they pay to employees.

Form 941: Form 941 reports payroll taxes, which include federal income tax withholding, Social Security tax, and Medicare tax. These taxes are withheld from employees' wages and are also matched and paid by employers.

Deposit Requirements

Form 940: Employers are generally required to make deposits of 941 FUTA tax throughout the year if their FUTA liability exceeds $500. Deposits can vary in frequency.

Form 941: Employers are required to deposit federal income tax withholding, Social Security tax, and Medicare tax on a semi-weekly or monthly basis, depending on the amount of taxes withheld.

4. When to file Form 940 vs 941?

Understanding the deadlines for filing Form 940 and Form 941 is essential to meeting your tax obligations. Filing these forms late or inaccurately can result in penalties and interest charges.

Form 940 Filing Deadlines

Form 940 is filed annually. The due date for filing Form 940 is January 31st of the following year. However, if you've deposited all your FUTA taxes on time, you have the option to file by February 10th. While Form 940 is an annual return, employers are required to make quarterly deposits if their FUTA tax liability exceeds $500 for the year. The due dates for these deposits are typically the last day of the month following the end of each quarter.

Form 941 Filing Deadline

Unlike Form 940, 941 is filed each quarter, The due dates for filing Form 941 are as follows:

  • Quarter 1 (January, February, March): Due by April 30th
  • Quarter 2 (April, May, June): Due by July 31st
  • Quarter 3 (July, August, September): Due by October 31st
  • Quarter 4 (October, November, December): Due by January 31st of the following year

Along with filing Form 941, you must deposit the withheld payroll taxes using the Electronic Federal Tax Payment System (EFTPS). Deposits are typically due on either a monthly or semi-weekly schedule, depending on the size of your tax liability.

5. How do I file Forms 940 and 941 with TaxBandits?

Filing Form 940 and 941 with TaxBandits is a straightforward and efficient process. Our platform is designed to simplify your tax filing needs, and we offer various features to ensure a seamless experience. This includes a bulk upload feature, allowing you to file multiple returns at once, saving you time and effort. We support various forms related to 941, including 941-PR, 941-SS, and 941 Schedule R. Plus, we cover the required supporting forms, such as 941 Schedule-B,
8453-EMP, 8974, 941-V, and Worksheets.

Get started with TaxBandits and simplify your Form 940 and 941 filing today!

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