As a small business owner, you are uniquely challenged each day, you must not only focus on the minute details that allow your business to operate successfully, but you must also keep the big picture in mind. 

You are constantly switching your viewpoint to thinking about what needs to happen immediately for your business to succeed and what your business needs in the long run. 

This can be especially challenging when it comes to maintaining your IRS compliance.

It is an ongoing process that can take a lot of work, but it can become stressful and difficult to keep up with when you are the main force driving your business forward. 

Your quarterly 941 filing is one of the most important aspects of your IRS compliance, but it can also be one of the most stressful.

Here are some helpful tips to get you up to speed for meeting your third-quarter reporting requirements. 

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Why is Quarterly Filing so Important? 

Many employers wonder why their quarterly filing is such a big deal, and why getting behind on these requirements can get them into hot water with the IRS.

Your year-end filing makes more sense, you have employees and contractors, so you file Forms W-2 and 1099 to report their wages, simple enough, right? 

Well, that is true however, there is actually a great deal of important information in your quarterly filing as well.

For one, the IRS needs to know the amount of taxes that you have withheld from your employees’ wages.

Since there have been COVID-19 tax credits available to employers, the credits your business claimed during the quarter must be reported properly on your quarterly Form 941

Let’s dive into this form a bit deeper, it’s become tricky over the past year. 

About Form 941

The majority of employers that have employees and these employees’ wages are subject to tax withholding are required to file Form 941. Form 941 is the Employer’s Quarterly Federal Tax Return. 

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By completing this form, employers are providing the following crucial information to the IRS. 

  • Wages paid
  • Tips that your employees reported to you (if applicable)
  • Federal Income tax you withheld from your employees’ paychecks
  • The employer and employee share of social security and Medicare taxes
  • Adjustments made during the quarter to social security and Medicare Taxes
  • Qualified small business tax credit for researching activities
  • Nonrefundable and refundable portions of qualified sick and family leave wages, the employee retention credit, and the COBRA premium assistance credit

Form 941 also helps employers determine if they have made any overpayments or underpayments when making their deposits to the IRS.

If there was an underpayment, the employer is required to make a tax payment to the IRS. If there was an overpayment, the business can either request a refund or apply it to their next return. 

You may be curious how all of these calculations are made and reported on Form 941. This is where the 941 worksheets come in.

Why are there 941 Worksheets? 

As the pandemic has continued, starting in the second quarter of 2020, Form 941 began to change.

This is because legislation such as the initial CARES Act, and later the American Rescue Plan have created and expanded the COVID-19 tax credits that are available to employers. 

Having access to these COVID-19 credits has been a key way of keeping businesses open during the most trying economic times this country has faced in recent history.

However, this must be reported to the IRS, and this is done on the 941 tax Form. 

Initially, the IRS created Worksheet 1, this was a catch-all to help employers calculate the tax credits they claimed.

However, as the pandemic continues, and the American Rescue Plan Act extended and expanded these credits, there are now 5 Worksheets total.

The following applies to the third quarter of 2021: 

  • Worksheet 1. Credit for Qualified Sick and Family Leave Wages for Leave Taken Before April 1, 2021 
  • Worksheet 3. Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2021 
  • Worksheet 4. Employee Retention Credit for Third and Fourth Quarters of 2021 Only (Qualified Wages Paid After June 30, 2021)
  • Worksheet 5. COBRA Premium Assistance Credit
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Employers must note that Worksheet 2 is no longer needed. For the third and fourth quarters of 2021, this should be replaced by Worksheet 4. 

When Is the Deadline to File Form 941? 

As it is a quarterly form, these are the four deadlines to file 941 with the IRS each year, as you can see the third deadline is approaching!

  • April 30, 2021 
  • July 31, 2021
  • October 31, 2021
  • January 31, 2022

As a general rule, if one of these deadlines falls on a holiday or over a weekend, the next business day becomes the deadline.

This is the case for the third quarter of 2021. Since the 31st falls on a weekend, November 1, 2021, is the official third-quarter deadline. 

Meeting your Third Quarter Form 941 Deadline

The best thing you can do as an employer that is required to file Form 941 is to start the process early.

The form changes almost every quarter and while the changes going into the third quarter are minimal (switching from Worksheet 2 to Worksheet 4 for calculating the ERC), it never hurts to be prepared. 

Even if you have a good familiarity with Form 941, taking some time to review the form and organize the information you need to file will help.

Another great time-saving option is to switch from filing a paper copy with the IRS to e-filing.

E-filing is a much easier process. By choosing an IRS authorized e-file provider, you can eliminate manual calculations and drastically reduce the time you spend waiting for the IRS to process your Form 941. 

As you can see, just because the spooky season is upon us, there is no need to fear Form 941 this quarter!