Forms 941, Employer's Quarterly Federal Tax Return; American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands

Userid: RMCOAR00

PAGER/SGML
Page 1 of 8

Fileid:

DTD INSTR04

Leadpct: -05% Pt. size: 9.5

D:\USERS\fh3bb\documents\Epicfiles\I941_FirstProof4q2007.sgm

Instructions for Form 941

❏

Draft

❏

Ok to Print

(Init. & date)

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007

Instructions for Form 941

Department of the Treasury
Internal Revenue Service

(Rev. October 2007)
Employer’s QUARTERLY Federal Tax Return
Section references are to the Internal Revenue Code unless
otherwise noted.

What’s New
Paid preparers are required to sign Form 941. A paid
preparer must sign Form 941 and provide the information
requested in the Paid preparer’s use only section if the
preparer was paid to prepare Form 941 and is not an
employee of the filing entity. The preparer must give you a
copy of the return in addition to the copy to be filed with the
IRS.
Changes to filing addresses. We have changed some of
the filing addresses to add Department of the Treasury. See
Where Should You File? on page 4.
Social security wage base for 2007. Do not withhold
social security tax after an employee reaches $97,500 in
social security wages. There is no limit on the amount of
wages subject to Medicare tax.

Reminders

• For EFTPS, visit www.eftps.gov or call EFTPS Customer

Service at 1-800-555-4477, 1-800-733-4829 (TDD), or
1-800-244-4829 (Spanish).
Where can you get telephone help? You can call the IRS
Business and Specialty Tax Line toll free at 1-800-829-4933
on Monday through Friday from 7 a.m. to 10 p.m. local time
(Alaska and Hawaii follow Pacific time) to order tax deposit
coupons (Form 8109) and for answers to your questions
about completing Form 941, tax deposit rules, or obtaining
an employer identification number (EIN).
Photographs of missing children. The Internal Revenue
Service is a proud partner with the National Center for
Missing and Exploited Children. Photographs of missing
children selected by the Center may appear in instructions
on pages that would otherwise be blank. You can help bring
these children home by looking at the photographs and
calling 1-800-THE-LOST (1-800-843-5678) if you recognize
a child.

General Instructions:
Purpose of Form 941

Reporting negative amounts. When reporting a negative
amount as a tax adjustment on line 7, use a “minus” sign
instead of parentheses. Doing so enhances the accuracy of
our scanning software. For example, report “-10.59” instead
of “(10.59).” However, if your software only allows for
parentheses in reporting negative amounts, you may use
them.
Annual employment tax filing for small employers.
Certain small employers will qualify to file Form 944,
Employer’s ANNUAL Federal Tax Return, rather than
Form 941, Employer’s QUARTERLY Federal Tax Return, to
report their employment taxes. The IRS will notify employers
who qualify to file Form 944 in February of each year. For
more information, see the Instructions for Form 944.
Credit card payments. Employers can pay the balance
due shown on Form 941 by credit card. Do not use a credit
card to make federal tax deposits. For more information on
paying your taxes with a credit card, visit the IRS website at
www.irs.gov and click on the electronic IRS link.
Correcting Form 941. If you discover an error on a
previously filed Form 941, make the correction using
Form 941 for the quarter in which you discovered the error
and attach Form 941c, Supporting Statement to Correct
Information. For example, in March 2007, you discover you
underreported $10,000 in social security and Medicare
wages on your fourth quarter 2006 Form 941. Correct the
error by showing $1,530 (15.3% × $10,000) on line 7e of
your 2007 first quarter Form 941 and attaching a completed
Form 941c. Be sure to include the $1,530 in any required
tax deposit.
Electronic filing and payment. Now, more than ever
before, businesses can enjoy the benefits of filing and
paying their federal taxes electronically. Whether you rely on
a tax professional or handle your own taxes, IRS offers you
convenient programs to make filing and paying easier.
Spend less time and worry on taxes and more time running
your business. Use e-file and Electronic Federal Tax
Payment System (EFTPS) to your benefit.
• For e-file, visit www.irs.gov for additional information.

These instructions give you some background information
about Form 941, Employer’s QUARTERLY Federal Tax
Return. They tell you who must file Form 941, how to fill it
out line by line, and when and where to file it.
If you want more in-depth information about payroll tax
topics relating to Form 941, see Pub. 15 (Circular E),
Employer’s Tax Guide, or visit the IRS website at www.irs.
gov/businesses and click on the Employment Taxes link.
Federal law requires you, as an employer, to withhold
taxes from your employees’ paychecks. Each time you pay
wages, you must withhold – or take out of your employees’
paychecks – certain amounts for federal income tax, social
security tax, and Medicare tax. Under the withholding
system, taxes withheld from your employees are credited to
your employees in payment of their tax liabilities.
Federal law also requires you to pay any liability for the
employer’s portion of social security and Medicare taxes.
This portion of social security and Medicare taxes is not
withheld from employees.

Who Must File Form 941?
Use Form 941 to report the following amounts.
Wages you have paid.
Tips your employees have received.
Federal income tax you withheld.
Both the employer’s and the employee’s share of social
security and Medicare taxes.
• Current quarter’s adjustments to social security and
Medicare taxes for fractions of cents, sick pay, tips, and
group-term life insurance.
• Prior quarters’ adjustments to payroll taxes (attach
Form 941c).
• Advance earned income tax credit (EIC) payments.
Do not use the Form 941 to report backup withholding or
income tax withholding on nonpayroll payments such as
pensions, annuities, and gambling winnings. Report these
types of withholding on Form 945, Annual Return of
Withheld Federal Income Tax.

•
•
•
•

Cat. No. 14625L

Page 2 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007
After you file your first Form 941, you must file a return
for each quarter even if you have no taxes to report unless
you filed a final return or one of the exceptions (below)
applies.

When Must You File?
File your initial Form 941 for the quarter in which you first
paid wages that are subject to social security and Medicare
taxes or subject to federal income tax withholding. See the
table below titled, When To File Form 941.
Then you must file for every quarter after that — every 3
months — even if you have no taxes to report (unless you
are a seasonal employer or are filing your final return. See
Seasonal employers and If your business has closed . . .
above).
File Form 941 only once for each quarter. If you filed
electronically, do not also file a paper Form 941. For more
information about filing Form 941 electronically, see
Electronic filing and payment on page 1.

Exceptions
Special rules apply to some employers.
• Seasonal employers do not have to file a Form 941 for
quarters in which they have no tax liability because they
have paid no wages. To tell the IRS that you will not file a
return for one or more quarters during the year, check the
box on line 17 every quarter you file the form. See
section 12 of Pub. 15 (Circular E) for more information.
• Employers of household employees do not usually file
Form 941. See Pub. 926, Household Employer’s Tax Guide,
and Schedule H (Form 1040), Household Employment
Taxes, for more information.
• Employers of farm employees do not usually file
Form 941. See Form 943, Employer’s Annual Tax Return for
Agricultural Employees, and Pub. 51 (Circular A),
Agricultural Employer’s Tax Guide.

When To File Form 941
Your Form 941 is due by the last day of the month that follows the end of the
quarter.

If none of the above exceptions applies and you

TIP have not filed a final return, you must file Form 941
each quarter even if you did not pay wages during
the quarter. Use IRS e-file, if possible.

What if you reorganize or close your
business?

The Quarter Includes . . .

Quarter Ends

Form 941
Is Due

1. January, February, March

March 31

April 30

2. April, May, June

June 30

July 31

3. July, August, September

September 30

October 31

4. October, November, December

December 31

January 31

For example, generally you must report wages you pay
during the first quarter — which is January through March —
by April 30th. If you made deposits in full payment of your
taxes for a quarter, you have 10 more days after the due
dates shown above to file your Form 941.
We consider your form filed on time if it is properly
addressed and mailed First-Class or if it is sent by an
IRS-designated delivery service on or before the due date.
See Pub. 15 (Circular E) for more information on
IRS-designated delivery services.
If any due date for filing shown above falls on a Saturday,
Sunday, or legal holiday, you may file your return on the
next business day.

If you sell or transfer your business . . .
If you sell or transfer your business, you and the new owner
must each file a Form 941 for the quarter in which the
transfer occurred. Report only the wages you paid.
When two businesses merge, the continuing firm must file
a return for the quarter in which the change took place and
the other firm should file a final return.
Changing from one form of business to another — such as
from a sole proprietorship to a partnership or corporation —
is considered a transfer. See section 1 of Pub. 15
(Circular E). If a transfer occurs, you may need a new
employer identification number (EIN). Attach a statement to
your return with:
• the new owner’s name (or the new name of the business);
• whether the business is now a sole proprietorship,
partnership, or corporation;
• the kind of change that occurred (a sale or transfer);
• the date of the change; and
• the name of the person keeping the payroll records and
the address where those records will be kept.

How Should You Complete Form 941?
Review Your Business Information at the
Top of the Form
If you are using a copy of Form 941 that has your business
name and address preprinted at the top of the form, check
to make sure the information is correct. Carefully review
your EIN to make sure it exactly matches the EIN assigned
to your business by the IRS. If any information is incorrect,
cross it out and type or print the correct information. See
also If you change your name or address... on page 3.
If you use a tax preparer to fill out Form 941, make sure
the preparer uses your business name and EIN exactly as
they appear on the preprinted form we sent you.
If you are not using a preprinted Form 941, type or print
your EIN, name, and address in the spaces provided. Also
enter your name and EIN here on the top of page 2. Do not
use your social security number (SSN) or individual taxpayer
identification number (ITIN). Generally, enter the business
(legal) name you used when you applied for your EIN on
Form SS-4, Application for Employer Identification Number.
For example, if you are a sole proprietor, enter “Haleigh
Smith” on the “Name” line and “Haleigh’s Cycles” on the
“Trade name” line. Leave the “Trade name” line blank if it is
the same as your “Name.”
Employer identification number (EIN). To make sure
businesses comply with federal tax laws, the IRS monitors
tax filings and payments by using a numerical system to
identify taxpayers. A unique 9-digit employer identification

If your business has closed . . .
If you go out of business or stop paying wages to your
employees, you must file a final return. To tell the IRS that
the form for a particular quarter is your final return, check
the box on line 16 and enter the date you last paid wages.
Also attach a statement to your return showing the name of
the person keeping the payroll records and the address
where those records will be kept.
See the Instructions for Forms W-2 and W-3 for
information about earlier dates for the expedited furnishing
and filing of Forms W-2 when a final Form 941 is filed.
If you participated in a statutory merger or consolidation,
or qualify for predecessor-successor status due to an
acquisition, you should generally file Schedule D (Form
941), Report of Discrepancies Caused by Acquisitions,
Statutory Mergers, or Consolidations. See the Instructions
for Schedule D
(Form 941) to determine whether you should file Schedule D
(Form 941) and when you should file it.

-2-

Page 3 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007

•
•
•
•
•

number (EIN) is assigned to all corporations, partnerships,
and some sole proprietors. Businesses needing an EIN
must apply for a number and use it throughout the life of the
business on all tax returns, payments, and reports.
Your business should have only one EIN. If you have
more than one and are not sure which one to use, write to
the IRS office where you file your returns (using the “Without
a payment” address on page 4) or call the IRS at
1-800-829-4933.

Federal income tax withholding.
Social security wages.
Social security tips.
Medicare wages and tips.
Advance earned income credit (EIC) payments.

For more information, see section 12 of Pub. 15
(Circular E) and the Instructions for Schedule D (Form 941).

Depositing Your Taxes:
When Must You Deposit Your Taxes?

If you do not have an EIN, you may apply for one online.
Go to the IRS website at www.irs.gov and click on the
Online EIN Application link. You may also apply for an EIN
by calling 1-800-829-4933, or you can fax or mail Form SS-4
to the IRS. If you have applied for an EIN but do not have
your EIN by the time a return is due, write “Applied For” and
the date you applied in the space shown for the number.

Determine if you are a monthly or
semiweekly schedule depositor for the
quarter.

Always be sure the EIN on the form you file exactly

The IRS uses two different sets of deposit rules to determine
when businesses must deposit their social security,
Medicare, and withheld federal income taxes. These
schedules tell you when a deposit is due after you have a
payday.

TIP matches the EIN IRS assigned to your business. Do
not use your social security number on forms that
ask for an EIN. Filing a Form 941 with an incorrect EIN or
using another business’s EIN may result in penalties and
delays in processing your return.
If you change your name or address... Notify the IRS
immediately if you change your business name or address.
• Write to the IRS office where you would file your return
“Without a payment” to notify the IRS of any name change.
Get Pub. 1635, Understanding Your EIN, to see if you need
to also apply for a new EIN.
• Complete and mail Form 8822, Change of Address, for
any address change.

Your deposit schedule is not determined by how often
you pay your employees. Your deposit schedule depends on
the total tax liability you reported on Form 941 during the
previous four-quarter lookback period (July 1 of the second
preceding calendar year through June 30 of last year). See
section 11 of Pub. 15 (Circular E) for details.
Before the beginning of each calendar year, determine
which type of deposit schedule you must use. If you
reported:
• $50,000 or less in taxes during the lookback period, you
are a monthly schedule depositor. Check the appropriate
box on line 15 and, if your tax liability for the quarter was
$2,500 or more, fill out the tax liability for each month in the
quarter.
• more than $50,000 of taxes for the lookback period, you
are a semiweekly schedule depositor. Check the
appropriate box on line 15 and, if your tax liability for the
quarter was $2,500 or more, fill out Schedule B (Form 941)
and attach it to Form 941 when you submit it.

Check the Box for the Quarter
Under “Report for this Quarter of 2007” at the top of the
form, check the appropriate box of the quarter for which you
are filing. Make sure the quarter checked is the same as
shown on any attached Schedule B (Form 941), Report of
Tax Liability for Semiweekly Schedule Depositors.

Completing and Filing Form 941
Make entries on Form 941 as follows to enable accurate
scanning and processing.
• Use 12-point Courier font (if possible) for all entries if you
are typing or using a computer to fill out your form.
• Omit dollar signs and decimal points. Commas are
optional. Report dollars to the left of the preprinted decimal
point and cents to the right of it.
• Leave blank any data field (except lines 1, 2, and 10) with
a value of zero.
• Enter negative amounts using a minus sign (if possible).
Otherwise, use parentheses.
• Enter your name and EIN on all pages and attachments.
Filers using the IRS-preaddressed Form 941 do not have to
enter their name and EIN on page 2.
• Staple multiple sheets in the upper left corner when filing.

See section 11 of Pub. 15 (Circular E) for the Next

TIP Day Deposit Rule on taxes of $100,000 or more

accumulated on any day during the deposit period.

How Must You Deposit Your Taxes?
You may have to deposit the federal income taxes you
withheld and both the employer and employee social
security taxes and Medicare taxes. If your total taxes after
adjustment for advance EIC (line 10) are:
• Less than $2,500 for the quarter. You do not have to
make a deposit, and you may pay the taxes in full with a
timely filed return. However, if you are unsure that your
taxes will be less than $2,500 for the quarter, deposit your
taxes using the appropriate rules (above) to avoid failure to
deposit penalties.
• $2,500 or more for the quarter. You must deposit your
taxes by using the Electronic Federal Tax Payment System
(EFTPS) or by depositing them at a financial institution that
is authorized to accept federal tax deposits (that is,
authorized depository) with Form 8109, Federal Tax Deposit
Coupon. See section 11 of Pub. 15 (Circular E) for more
information.

Other Forms That You Must Use
Give each eligible employee Notice 797, Possible Federal
Tax Refund Due to the Earned Income Credit (EIC). Then
each eligible employee who wishes to receive any advance
earned income credit (EIC) payments must give you a
completed Form W-5, Earned Income Credit Advance
Payment Certificate. For more information, see section 10 of
Pub. 15 (Circular E) and also Pub. 596, Earned Income
Credit.

Reconciling Forms 941 and Form W-3
The IRS matches amounts reported on your four quarterly
Forms 941 with Form W-2 amounts totaled on your yearly
Form W-3, Transmittal of Wage and Tax Statements. If the
amounts do not agree, you may be contacted by the IRS or
the Social Security Administration (SSA). The following
amounts are reconciled.

EFTPS is an easy, safe, and convenient way for all

TIP employers to make their tax deposits. Using EFTPS
helps eliminate errors commonly made on federal tax
deposit (FTD) coupons. Some taxpayers are required to
use EFTPS to deposit their taxes. See section 11 of
Pub. 15 (Circular E) for details.

-3-

Page 4 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007
Your filing or payment address may have changed
from prior years. If you are using an IRS-provided
CAUTION envelope, use only the labels and envelope provided
with the tax package. Do not send Form 941 or any
payments to the SSA. Private delivery services cannot
deliver to P.O. boxes.

What About Penalties and Interest?

!

Avoiding penalties and interest
You can avoid paying penalties and interest if you do all of
the following:
• Deposit or pay your taxes when they are due, using
EFTPS if required.
• File your fully completed Form 941 on time.
• Report your tax liability accurately.
• Submit valid checks for tax payments.
• Furnish accurate Forms W-2 to employees.
• File Form W-3 and Copies A of Form W-2 with the Social
Security Administration (SSA) on time and accurately.

Specific Instructions:
Part 1: Answer these questions for
this quarter.

Penalties and interest are charged on taxes paid late
and returns filed late at a rate set by law. See sections 11
and 12 of Pub. 15 (Circular E) for details.

1. Number of employees who received
wages, tips, or other compensation this
quarter

Use Form 843, Claim for Refund and Request for
Abatement, to request abatement of assessed penalties or
interest. Do not request abatement of assessed penalties or
interest on Form 941 or Form 941c.

Tell us the number of employees on your payroll for the pay
period including March 12, June 12, September 12, or
December 12 for the quarter indicated at the top of the
return. Do not include:
• household employees,
• employees in nonpay status for the pay period,
• farm employees,
• pensioners, or
• active members of the Armed Forces.

A trust fund recovery penalty may apply if federal
income, social security, and Medicare taxes that
CAUTION must be withheld are not withheld or paid. The
penalty is the full amount of the unpaid trust fund tax. This
penalty may apply when these unpaid taxes cannot be
collected from the employer. The trust fund recovery penalty
may be imposed on all people the IRS determines to be
responsible for collecting, accounting for, and paying these
taxes, and who acted willfully in not doing so. For details,
see section 11 of Pub. 15 (Circular E).

!

If you enter “250” or more on line 1, you must file

TIP Forms W-2 electronically. The SSA will not accept

Where Should You File?

magnetic submissions after December 31, 2006. For
details, call the SSA at 1-800-772-6270 or visit SSA’s
Employer W-2 Filing Instructions and Information website at
www.socialsecurity.gov/employer.

Where you file depends on whether you include a payment
with your form.

2. Wages, tips, and other compensation

Without a
payment . . .

With a payment . . .

Special filing addresses for
exempt organizations; federal,
state, and local governmental
entities; and Indian tribal
governmental entities; regardless
of location

Department of the
Treasury
Internal Revenue
Service
Ogden, UT 84201-0005

Internal Revenue
Service
P.O. Box 105083
Atlanta, GA
30348-5083

Connecticut
Delaware
District of
Columbia
Illinois
Indiana
Kentucky
Maine
Maryland
Massachusetts
Michigan
New Hampshire

New Jersey
New York
North Carolina
Ohio
Pennsylvania
Rhode Island
South Carolina
Vermont
Virginia
West Virginia
Wisconsin

Department of the
Treasury
Internal Revenue
Service
Cincinnati, OH
45999-0005

Internal Revenue
Service
P.O. Box 70503
Charlotte, NC
28201-0503

Alabama
Alaska
Arizona
Arkansas
California
Colorado
Florida
Georgia
Hawaii
Idaho
Iowa
Kansas
Louisiana
Minnesota
Mississippi

Missouri
Montana
Nebraska
Nevada
New Mexico
North Dakota
Oklahoma
Oregon
South Dakota
Tennessee
Texas
Utah
Washington
Wyoming

Department of the
Treasury
Internal Revenue
Service
Ogden, UT
84201-0005

Internal Revenue
Service
P.O. Box 105083
Atlanta, GA
30348-5083

If you are in . . .

No legal residence or principal
place of business in any state

Enter amounts on line 2 that would also be included in box 1
of your employees’ Forms W-2. Include sick pay paid by a
third party if you were given timely notice of the payments
and transferred liability for the employees’ taxes. See the
Instructions for Forms W-2 and W-3 for details.
If you are a third-party payer of sick pay, do not include
sick pay that you paid to policyholders’ employees here if
you gave the policyholders timely notice of the payments.

3. Total income tax withheld from wages,
tips, and other compensation
Enter the federal income tax you withheld (or were required
to withhold) from your employees on this quarter’s wages,
tips, taxable fringe benefits, and supplemental
unemployment compensation benefits. Do not include any
income tax withheld by a third-party payer of sick pay even if
you reported it on Form W-2. You will reconcile this
difference on Form W-3. Also include here any excise taxes
you were required to withhold on golden parachute
payments (section 4999).
If you are a third-party payer of sick pay, enter the federal
income tax you withheld (or were required to withhold) on
third-party sick pay here.

4. If no wages, tips, and other
compensation on line 2 are subject to social
security or Medicare tax . . .
Internal Revenue
Service
P.O. Box 409101
Ogden, UT 84409

If no wages, tips, and other compensation on line 2 are
subject to social security or Medicare tax, check the box on
line 4. If this question does not apply to you, leave the box
blank. For more information about exempt wages, see
section 15 of Pub. 15 (Circular E) and section 4 of
Pub. 15-A.

Internal Revenue
Service
P.O. Box 105273
Atlanta, GA
30348-5273

-4-

Page 5 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007
If you are a government employer, wages you pay
are not automatically exempt from social security
CAUTION and Medicare taxes. Your employees may be
covered by law or by a voluntary Section 218 Agreement
with SSA. For more information, see Pub. 963,
Federal-State Reference Guide.

+

!

6. Total taxes before adjustments
Add the total federal income tax withheld from wages, tips,
and other compensation and total social security and
Medicare taxes before adjustments.

5. Taxable social security and Medicare
wages and tips

+

5a. Taxable social security wages. Report the total
wages, sick pay, or fringe benefits subject to social security
taxes you paid to your employees during the quarter. For
this purpose, sick pay includes payments made by an
insurance company to your employees for which you
received timely notice from the insurance company. See
Section 6 in Pub. 15-A for more information about sick pay
reporting.
Enter the amount before deductions. Do not include tips
on this line. For information on types of wages subject to
social security taxes, see section 5 of Pub. 15 (Circular E).
The rate of social security tax on taxable wages is 6.2
percent (.062) each for the employer and employee or 12.4
percent (.124) for both. Stop paying social security tax on
and reporting an employee’s wages on line 5a when the
employee’s taxable wages (including tips) reach $97,500
during 2007. However, continue to withhold income and
Medicare taxes for the whole year on wages and tips even
when the social security wage base of $97,500 has been
reached.
x

Enter tax amounts on lines 7a through 7g that result from
current or prior period adjustments. Use a minus sign (if
possible) to show an adjustment that decreases the total
taxes shown on line 6. Do not enter an amount on line 7f or
line 7g unless the IRS has sent you a notice instructing you
to do so.
Current period adjustments. In certain cases, you must
adjust the amounts you reported as social security and
Medicare taxes in column 2 of lines 5a, 5b, and 5c to figure
your correct tax liability for this quarter’s Form 941. See
section 13 of Pub. 15 (Circular E). Do not attach Form 941c
or an equivalent statement for current period adjustments.
If you need to adjust any amount previously reported on
lines 7a, 7b, or 7c, use line 7e to report the adjustment and
attach Form 941c or an equivalent statement with an
explanation.
7a. Current quarter’s fractions of cents. Enter
adjustments for fractions of cents (due to rounding) relating
to the employee share of social security and Medicare taxes
withheld. The employee share (one-half) of amounts shown
in column 2 of lines 5a, 5b, and 5c may differ slightly from
amounts actually withheld from employees’ paychecks due
to the rounding of social security and Medicare taxes based
on statutory rates.
7b. Current quarter’s sick pay. Enter the adjustment
for the employee share of social security and Medicare
taxes that were withheld by your third-party sick pay payer.
7c. Current quarter’s adjustments for tips and
group-term life insurance. Enter adjustments for:
• any uncollected employee share of social security and
Medicare taxes on tips and
• the uncollected employee share of social security and
Medicare taxes on group-term life insurance premiums paid
for former employees.
Prior period adjustments. Use lines 7d through 7g to
adjust amounts reported on previous returns. If you need
to report both an increase and a decrease for the same line,
show only the difference.
Adjustments you report here change your tax liability and
your tax deposits. You will have to take these adjustments
into account on line 15 as Tax liability: Month 1; Month 2;
Month 3 or on Schedule B (Form 941). You must explain
any prior period adjustments that you make on
Form 941c or in an equivalent statement.
Form 941c is not an amended return but is a statement
providing the necessary information and certifications for
adjustments shown on lines 7d through 7g. Do not file
Form 941c separately from Form 941. See also section 13
of Pub. 15 (Circular E).
7d. Current year’s income tax withholding. Enter
adjustments for the current year’s federal income tax
withholding. For example, if you made a mistake when
withholding federal income tax from wages that were paid in
earlier quarters of the same calendar year, adjust it here.
However, see the CAUTION below for adjustment of a prior
year’s “administrative error” also shown on line 7d.
You cannot adjust or claim a refund or credit for any
overpayment of federal income tax that you withheld or
deducted from your employees in a previous year because

line 5a (column 1)
.124
line 5a (column 2)

line 5b (column 1)
.124
line 5b (column 2)

5c. Taxable Medicare wages and tips. Report all
wages, tips, sick pay, and taxable fringe benefits that are
subject to Medicare tax. Unlike social security wages, there
is no limit on the amount of wages subject to Medicare tax.
Include all tips your employees reported during the
quarter, even if you were unable to withhold the employee
tax of 1.45%.
x

line 3
line 5d
line 6

7. TAX ADJUSTMENTS

5b. Taxable social security tips. Enter all tips your
employees reported to you during the quarter until the total
of the tips and wages for an employee reach $97,500 in
2007. Do this even if you were unable to withhold the
employee tax of 6.2%.
An employee must report cash tips to you, including tips
you paid the employee for charge customers, totaling $20 or
more in a month by the 10th of the next month. Employees
may use Form 4070, Employee’s Report of Tips to
Employer, or submit a written statement or electronic tip
record.
Do not include allocated tips on this line. Instead, report
them on Form 8027, Employer’s Annual Information Return
of Tip Income and Allocated Tips. Allocated tips are not
reportable on Form 941 and are not subject to withholding of
federal income, social security, or Medicare taxes.
x

line 5c (column 2)
line 5d

line 5c (column 1)
.029
line 5c (column 2)

For more information, see section 6 of Pub. 15
(Circular E).
5d. Total social security and Medicare taxes. Add
the social security tax, social security tips tax, and Medicare
tax.
line 5a (column 2)
line 5b (column 2)

-5-

Page 6 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007
employees use the amount shown on Form W-2 as a credit
when they file their income tax returns.

−

Do not adjust federal income tax withholding for
quarters in previous years unless you do it to correct
CAUTION an administrative error. An administrative error
happened if the amount you entered on Form 941 was not
the same amount you actually withheld. For example, when
the total amount of federal income tax actually withheld was
not reported correctly on Form 941 because of a
mathematical or transposition error, the difference is an
administrative error. The administrative error adjustment
corrects the amounts reported on the Form 941 to agree
with the amount actually withheld from the employee.
Remember to attach an explanation for the adjustment.

• If line 10 is less than $2,500, you may pay the full
amount with a timely filed return because you were not
required to deposit. See section 11 of Pub. 15 (Circular E)
for information and rules about federal tax deposits.
• If line 10 is $2,500 or more, you must deposit your tax
liabilities using EFTPS or at an authorized financial
institution with Form 8109. The amount shown on line 10
must equal the “Total liability for quarter” shown on Form
941, line 15 or the “Total liability for the quarter” shown on
Schedule B (Form 941).

!

If you are a semiweekly depositor, you must
complete Schedule B (Form 941). If you fail to
CAUTION complete and submit Schedule B (Form 941), IRS
will assert deposit penalties based on available information.

!

7e. Prior quarters’ social security and Medicare
taxes. Enter adjustments for prior quarters’ social security
and Medicare taxes. For example, if you made a mistake
when reporting social security and Medicare taxes on
previously filed Forms 941, adjust it here. If you need to
report both an underpayment and an overpayment, show
only the net difference.

11. Total Deposits for This Quarter
Enter your deposits for this quarter, including any deposits
that you were required to make to cover prior period
liabilities resulting from adjustments shown on line 7. Also
include in the amount shown any overpayment from a
previous period that you applied to this return.

If you are adjusting an employee’s social security

TIP wages, social security tips, or Medicare wages and
tips for a prior year, you must also file Form W-2c,
Corrected Wage and Tax Statement, and Form W-3c,
Transmittal of Corrected Wage and Tax Statements.

12. Balance Due
If line 10 is more than line 11, write the difference in line 12.
Otherwise, see Overpayment below.

7f. Special additions to federal income tax. This line
is reserved for employers with special circumstances. Use
this line only if the IRS has sent you a notice instructing you
to do so. You must attach Form 941c explaining the tax
increase.

You do not have to pay if line 12 is under $1.
Generally, you should have a balance due only if your total
taxes after adjustment for advance EIC for the quarter (line
10) are less than $2,500. However, see section 11 of Pub.
15 (Circular E) for information about payments made under
the accuracy of deposits rule.

7g. Special additions to social security and
Medicare. This line is reserved for employers with special
circumstances. Use this line only if the IRS has sent you a
notice instructing you to do so. You must attach Form 941c
explaining the tax increase.

You may pay the amount shown on line 12 using EFTPS,
or a check, money order, or credit card. Do not use a credit
card to pay taxes that were required to be deposited. For
more information on paying your taxes with a credit card,
visit the IRS website at www.irs.gov and click on the
electronic IRS link.

7h. TOTAL ADJUSTMENTS. Combine all adjustments
shown on lines 7a through 7g and enter the result here.

8.

line 8
line 9
line 10

Total Taxes After Adjustments

If you pay by EFTPS or credit card, file your return using
the “Without a payment” address on page 4 under Where
Should You File? and do not file Form 941-V, Payment
Voucher.

Combine the amounts shown on lines 6 and 7h and enter
the result here.

9. Advance Earned Income Credit (EIC)
Payments Made to Employees

If line 10 is $2,500 or more and you have deposited all
taxes when due, line 12 (“Balance due”) should be zero.

Enter the amount of the advance earned income credit (EIC)
payments that you made to your employees. Eligible
employees may choose to receive part of the EIC as an
advance payment. Those who expect to have a qualifying
child must give you a completed Form W-5 stating they
expect to qualify for the EIC. Once the employee gives you
a signed and completed Form W-5 you must make the
advance EIC payments starting with the employee’s next
wage payment. Advance EIC payments are generally made
from withheld federal income tax and employee and
employer social security and Medicare taxes. See section
10 of Pub. 15 (Circular E) and Pub. 596, Earned Income
Credit.

!

CAUTION

If you do not deposit as required and, instead, pay
the taxes with Form 941, you may be subject to a
penalty.

13. Overpayment
If line 11 is more than line 10, write the difference in line 13.
Never make an entry in both lines 12 and 13.
If you deposited more than the correct amount for a
quarter, you can choose to have the IRS either refund the
overpayment or apply it to your next return. Check the
appropriate box in line 13. If you do not check either box, we
will automatically refund the overpayment. We may apply
your overpayment to any past due tax account that is shown
in our records under your EIN.

If the amount of your advance EIC payments is more
than your total taxes after adjustments (line 8) for the
quarter, you may claim a refund of the overpayment or elect
to have the credit applied to your return for the next quarter.
Attach a statement to your Form 941 identifying the amount
of excess payments and the pay periods in which you paid
it. See section 10 of Pub. 15 (Circular E).

If line 13 is under $1, we will send a refund or apply it to
your next return only if you ask us in writing to do so.

Complete both pages.

10. Total Taxes After Adjustment for
Advance EIC

You must complete both pages of Form 941 and sign on
page 2. Failure to do so may delay processing of your
return.

Calculate your total taxes as shown below.

-6-

Page 7 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007

Here’s an example:

Part 2: Tell us about your deposit
schedule and tax liability for this
quarter.

Pine Co. discovered on February 6, 2007, that it
overreported social security tax on a prior quarter return by
$2,500. Its Form 941 taxes for the first quarter of 2007 were:
January =
February =
March =

14. State abbreviation
In the spaces provided, write the two-letter U.S. Postal
Service abbreviation for the bank branch in the state where
you deposit your taxes using Form 8109 or initiate EFTPS
transfers. IRS uses the state shown to determine banking
days for purposes of deposit due dates. Official state
holidays for the state shown are not counted as banking
days. If you deposit in multiple states, enter “MU” in the
spaces provided.

$2,000
$2,000
$2,000

Pine Co. reports liabilities on line 15 as follows:
Month 1 =
Month 2 =
Month 3 =
Total

$2,000
0
+$1,500
$3,500

The prior period adjustment ($2,500) offsets the $2,000
liability for February and the excess $500 must be used to
offset March liabilities. Since the error was not discovered
until February, it does not affect January liabilities reported
in Month 1 of line 15.
Using the above example, if the overreported social
security tax on a prior quarter return had been $10,000, Pine
Co. could carry the excess negative adjustment of $6,000
($10,000 − $2,000 − $2,000) to the next quarter. Pine Co.
would only report $4,000 of the adjustment on line 7e
because line 10 must equal the total shown in line 15. See
Form 941c for reporting requirements and information on the
option of filing a claim for refund of overpaid employment
taxes.

When you deposit in multiple states, IRS cannot
determine what portion of your liability was affected by a
state holiday and may propose a deposit penalty for one or
more of the states where you made deposits. If you receive
a notice and your deposit due date was extended because
of a state bank holiday, respond to the notice citing the state
holiday and applicable deposit amount.

15. Check one:
• If line 10 is less than $2,500, check the appropriate box in

line 15 and go to Part 3.
• If you reported $50,000 or less in taxes during the
lookback period (see below), you are a monthly schedule
depositor unless the $100,000 Next-Day Deposit Rule
discussed in section 11 of Pub. 15 (Circular E) applies.
Check the appropriate box on line 15 and fill out your tax
liability for each month in the quarter.

Part 3: Tell us about your business.
In Part 3, answer only those questions that apply to your
business. If the questions do not apply, leave them blank
and go to Part 4.

+ Month 1
+ Month 2
+ Month 3
Total tax liability for quarter

16. If Your Business Has Closed . . .
If you go out of business or stop paying wages, you must file
a final return. To tell IRS that a particular Form 941 is your
final return, check the box on line 16 and enter the date you
last paid wages in the space provided. For additional filing
requirements, see If your business has closed... on page 2.

Note that your total tax liability for the quarter must equal
your total taxes shown on line 10. If it does not, your tax
deposits and payments may not be counted as timely.
You are a monthly schedule depositor for the calendar
year if the amount of your Form 941 taxes reported for the
lookback period is $50,000 or less. The lookback period is
the four consecutive quarters ending on June 30 of the prior
year. For 2007, the lookback period begins July 1, 2005,
and ends June 30, 2006. For details on the deposit rules,
see section 11 of Pub. 15 (Circular E).

17. If You Are a Seasonal Employer . . .
If you hire employees seasonally — such as for summer or
winter only — check the box on line 17. Checking the box
tells IRS not to expect four Forms 941 from you throughout
the year because you have not paid wages regularly.
IRS will mail you two forms once a year after March 1.
Generally, we will not ask about unfiled returns if you file at
least one return showing tax due each year. However, you
must check the box every time you file a Form 941.
Also, when you fill out Form 941, be sure to check the
box on the top of the form that corresponds to the quarter
reported.

This is a summary of your monthly tax liability, not a
summary of deposits you made. If you do not
CAUTION properly report your liabilities when required or if you
are a semiweekly schedule depositor and report your
liabilities on line 15 instead of on Schedule B (Form 941),
you may be assessed an “averaged” failure-to-deposit (FTD)
penalty. See Deposit Penalties in section 11 of Pub. 15
(Circular E) for more information.

!

• If you reported more than $50,000 of taxes for the

Part 4: May we speak with your
third-party designee?

Reporting adjustments on line 15. If your tax liability for
any month is negative (for example, if you are adjusting an
overreported liability in a prior period), do not enter a
negative amount for the month. Instead, enter zero for the
month and subtract that negative amount from your tax
liability for the next month.

If you want to allow an employee, a paid tax preparer, or
another person to discuss your Form 941 with the IRS,
check the “Yes” box in Part 4. Then tell us the name and the
five-digit personal identification number (PIN) of the specific
person to speak with — not the name of the firm who
prepared your tax return. The designee may choose any five
numbers as his or her PIN.
By checking “Yes,” you authorize the IRS to talk to the
person you named (your designee) about any questions we
may have while we process your return. You also authorize
your designee to:

lookback period (see above), you are a semiweekly
schedule depositor. Check the appropriate box on line 15.
You must complete Schedule B (Form 941) and submit it
with your Form 941. Do not use Schedule B
(Form 941) if you are a monthly schedule depositor.

-7-

Page 8 of 8

Instructions for Form 941

10:39 - 17-OCT-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Second Circulation, Oct. 19, 2007

• give us any information that is missing from your return,
• call us for information about processing your return, and
• respond to certain IRS notices that you have shared with

Other IRS Products You May Need

your designee about math errors and return preparation.
IRS will not send notices to your designee.
You are not authorizing your designee to bind you to
anything (including additional tax liability) or to otherwise
represent you before the IRS. If you want to expand your
designee’s authorization, see Pub. 947, Practice Before the
IRS and Power of Attorney.
The authorization will automatically expire 1 year from the
due date (without regard to extensions) for filing your
Form 941. If you or your designee want to terminate the
authorization, write to the IRS office for your locality using
the “Without a payment” address under Where Should You
File on page 4.

Part 5: Sign Here
Complete all information in Part 5 and sign Form 941 as
follows.
• Sole proprietorship — The individual who owns the
business.
• Corporation (including an LLC treated as a
corporation) — The president, vice president, or other
principal officer.
• Partnership (including an LLC treated as a
partnership) or unincorporated organization — A
responsible and duly authorized member or officer having
knowledge of its affairs.
• Single member limited liability company (LLC) treated
as a disregarded entity — The owner of the limited liability
company (LLC).
• Trust or estate — The fiduciary.
Form 941 may also be signed by a duly authorized agent
of the taxpayer if a valid power of attorney has been filed.
Alternative signature method. Corporate officers or duly
authorized agents (but not paid preparer’s) may sign Form
941 by rubber stamp, mechanical device, or computer
software program. For details and required documentation,
see Rev. Proc. 2005-39. You can find Rev. Proc. 2005-39
on page 82 of Internal Revenue Bulletin 2005-28 at www.irs.
gov/pub/irs-irbs/irb05-28.pdf.
Paid preparers. A paid preparer must sign Form 941 and
provide the information requested in the Paid preparer’s use
only section of Part 5 if the preparer was paid to prepare
Form 941 and is not an employee of the filing entity. The
preparer must give you a copy of the return in addition to the
copy to be filed with the IRS.
Do not complete the Paid Preparer’s Use Only section if
you are filing the return as a reporting agent and have a
valid Form 8655, Reporting Agent Authorization, on file with
the IRS.

How to Order Forms and Publications
from the IRS
Call 1-800-829-3676.

Visit the IRS website at www.irs.gov.

-8-

•

Form SS-4, Application for Employer Identification Number

•

Form W-2, Wage and Tax Statement

•

Form W-2c, Corrected Wage and Tax Statement

•

Form W-3, Transmittal of Wage and Tax Statements

•

Form W-3c, Transmittal of Corrected Wage and Tax
Statements

•

Form W-4, Employee’s Withholding Allowance Certificate

•

Form W-5, Earned Income Credit Advance Payment
Certificate

•

Form 940, Employer’s Annual Federal Unemployment (FUTA)
Tax Return

•

Form 941c, Supporting Statement to Correct Information

•

Form 943, Employer’s Annual Federal Tax Return for
Agricultural Employees

•

Form 944, Employer’s ANNUAL Federal Tax Return

•

Form 945, Annual Return of Withheld Federal Income Tax

•

Form 4070, Employee’s Report of Tips to Employer

•

Form 8027, Employer’s Annual Information Return of Tip
Income and Allocated Tips

•

Instructions for Forms W-2 and W-3

•

Instructions for Form 944

•

Notice 797, Possible Federal Tax Refund Due to the Earned
Income Credit (EIC)

•

Pub. 15 (Circular E), Employer’s Tax Guide

•

Pub. 15-A, Employer’s Supplemental Tax Guide

•

Pub. 15-B, Employer’s Tax Guide to Fringe Benefits

•

Pub. 51 (Circular A), Agricultural Employer’s Tax Guide

•

Pub. 596, Earned Income Credit

•

Pub. 926, Household Employer’s Tax Guide

•

Pub. 947, Practice Before the IRS and Power of Attorney

•

Schedule B (Form 941), Report of Tax Liability for
Semiweekly Schedule Depositors

•

Schedule D (Form 941), Report of Discrepancies Caused by
Acquisitions, Statutory Mergers, or Consolidations

•

Schedule H (Form 1040), Household Employment Taxes