Paying 941 Taxes: 9 Questions About Your 941 Payments
Let’s be honest. Taking care of your company’s tax obligations probably doesn’t make your list of Top Ten Things I Love About Running My Business.
Since that’s the case, it pays to make the ordeal as painless and efficient as possible. Besides, knowledge is power! If you’re new – or fairly new – to the quarterly 941 tax payment and deposit process, here are answers to nine common questions that might trip you up.
Read on. And remember to always consult with your tax professional to make sure you’re on the right track.
1. What is a 941 payment? As an employer, federal law requires you to withhold funds from employee paychecks in order to pay certain taxes. For each pay period, particular amounts for federal incomes taxes, social security taxes, and Medicare taxes are taken out of your employees’ pay. These taxes withheld are paid quarterly to the U.S. Treasury, and are credited toward the employees’ tax liabilities.
You are also required, as part of your quarterly 941 payment, to report and pay the employer’s share of social security and Medicare taxes.
2. How do I pay 941 taxes? Payments are made electronically, via phone or Internet, through the Electronic Federal Tax Payment System, or EFTPS. Payments can be made at any time of day or night, and can also be scheduled in advance.
Your accountant or tax preparer will know how to get your company set up on EFTPS.
3. When is the next due date for 941 payments? Quarterly payments are due on the last day of the month following the end of the quarter. Should the day fall on a legal holiday, a Saturday, or a Sunday, the next business day becomes the due date.
The first 941 deposit for 2013 is due on Tuesday, April 30.
4. What are the other 941 tax payments due dates for 2013 and 2014? For 2013, the 941 deposit dates are April 30, July 31 and October 31 – and January 31, 2014.
For 2014, the 941 deposit dates are April 30, July 31 and October 31 – and February 2, 2015.
5. What happens if I’m late on a payment? Call us nit-picky…but you’re just better off not being late on a 941 payment. Penalties and interest are almost always applied, and they can pileup quickly.
6. How do I avoid 941 penalties and interest? According to the IRS, here’s what you need to do:
- Deposit your quarterly taxes when they are due
- File your fully completed Form 941 on time
- Report your tax liability accurately
- Furnish accurate W-2 forms to employees
7. How are 941 penalties applied? For failing to file or filing late, your company can be penalized severely. The fines start at 5% of the tax due.
Your company can also be penalized for failing to pay and for late payments. Depending on the amount involved and the length of time overdue, the fines can escalate to 25% of the tax owed.
In addition to the 941 penalties, the IRS can charge interest charges on the taxes owed. It’s calculated at the federal short-term interest rate, plus 3 percentage points, and the interest is compounded daily. That can add up quickly, so be sure to pay off the debt as soon as possible.
8. What are my options if I fall behind on my 941 tax payments? It happens. Companies miss 941 payments because of downturns in business, or because of any number of cash flow management problems. Have your contact tax advisor contact the IRS immediately.
The IRS may ask for a meeting to discuss the matter, but in any case will respond with a notice designating penalties, fees, and a payment plan. You have 60 days to respond.
9. Where can I get more information about IRS 941 payments? The IRS provides official instructions for 941 payments. In addition, your tax accountant, payroll advisers and commercial bankers should be able to answer your specific questions.
If cash flow management issues are a persistent problem for your company and are making it difficult to meet quarterly tax obligations, an invoice factoring program can help. Invoice factoring can get money into your accounts fast, and does not involve taking on additional debt. MP Star Financial can help you get a better handle on your company’s cash flow management. Call for more information. (800) 833-3765, extension 150.