IRS Form 941 Summary

Tax Professionals' Resource
November 2, 2012 — 1,447 views  
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IRS Form 941 Summary

Every employer who pays people to work as employees is required by the U.S. Internal Revenue Service and the federal tax code to withhold a certain percentage of gross earnings as anticipated tax collections for the government. This process, known as withholding, cuts a piece of a worker’s earnings out of his total paycheck and puts it in a holding account. The employer is then required to send this money to the IRS, along with the proper tax accounting, on a quarterly basis, if not sooner. These held-back funds include federal income tax, social security taxes for the senior subsidy program, and for Medicare.

The Expected Result of Reporting

Once the withholding funds and associated paperwork are sent to the IRS, the worker then received credit for the tax withholding received in his name. This in turn reduces the worker’s tax liability at tax return filing time on the following April 15th. Along with the worker’s withholding, the employer also remits its own share of employment taxes to the IRS as well.

Reporting

Withholding funds are recorded and reported on IRS Form 941. This document tracks and functions as a payment statement to the IRS for federal tax withholding transferred, as well as funds for social security and Medicare. The form itself includes all the necessary employer identification information, which quarter the funds paid apply to, and summary reporting of funds transferred. On the second page of the Form 941 the employer then reports its tax liability for the quarter as well as any changes in labor use. The actual payment for the quarter is then accompanied by the a voucher, the Form 941-V so that IRS accounting knows what to associate the payment with.

The Take Home Point

The critical aspect to keep in mind about the Form 941 is that it is a summary tax report. Additional information is required to track each individual employee’s tax withholding treatment. However, for the employer’s purposes the aggregate reporting tracks the employer’s role and responsibility in IRS reporting. Of course, the aggregate of each of the individual worker impacts and the summary of the Form 941 information need to reconcile in total. So the process of reporting takes quite a bit of accounting in large companies and organizations. If a company doesn’t have the internal skilled personnel to handle this task, it is strongly recommended to use a licensed certified public accountant firm to handle the work correctly.

 

Tax Professionals' Resource