Difference Between Form 940 and Form 941 (With Table)

There are multiple payroll tax obligations that employers face, and with multiple forms sharing a similar pattern and structure, it becomes even more difficult to collect forms from an authorized source and submit them correctly. Hence, you must be aware of the difference between the various forms and their importance.

Form 940 vs Form 941

The difference between form 940 and form 941 is that form 940 is filed annually and reports the Federal Unemployment Tax liability of an employer. While form 941 reports the Federal Insurance Taxes and the Federal Income tax Withholding. Form 940 reports the FUTA tax, which is paid by the employer, while Form 941 reports the shared taxes between the employer and the employee.

The IRS Form 940 is used to Calculate the annual FUTA tax of a firm and is filed by an employer. The main aim behind the filling of this form is to pay the unemployment compensation for the employees who lost their jobs. Form 940 calculates the FUTA tax Of a business for the previous year and also calculates any outstanding unemployment Taxes for the previous as well as the current year.

Form 941 or the employer’s quarterly tax form serves the purpose of reporting the federal withholdings from most of the employees. In this form, an employer is supposed to report the number of employees, the amount of security money they have deposited, and all security and Medicare withholdings of the employee. It also reports the advances on the income credits earned by the employee.

Comparison Table Between Form 940 and Form 941

Parameters of ComparisonForm 940Form 941
Basic InformationThe IRS Form 940 is used to Calculate the annual FUTA tax of a firm and is filed by an employer. Form 941 or the employer’s quarterly tax form serves the purpose of reporting the federal withholdings from most of the employees.
Main AimForm 940 calculates the FUTA tax Of a business for the previous year and also calculates any outstanding unemployment Taxes for the previous as well as the current year. It is used to report the number of employees, the amount of security money they have deposited, and all security and Medicare withholdings of the employee.
DurationForm 940 is filed annually. Form 941 is filed quarterly
Last Date of FilingForm 940 should be filed before the end of February every year. The deadlines for filing a Form 941 are April 30, July 31, October 31, and January 31 every year.
ExceptionsNoneThe exceptions to filing a Form 941 are Seasonal employers that do not pay wages to the employees for one or more quarters, household employees, and agricultural employees

What is Form 940?

The IRS Form 940 is used to Calculate the annual FUTA tax of a firm and is filed by an employer. The main aim behind the filling of this form is to pay the unemployment compensation for the employees who lost their jobs. Form 940 calculates the FUTA tax Of a business for the previous year and also calculates any outstanding unemployment Taxes for the previous as well as the current year.

The Form 940 becomes double, just like the annual payroll return. It is based on the first $7000 wage of each employee. This is filed by the employers along with their IRS reporting stating the amount of money paid by them to their employees. Each employee of the firm is to be listed along with their SSN and their annual wages.

If the employees of an employer are present in more than one state, the employer also has to file section A of Form 940. This is used to check if the particular state has a wage deduction principle under the unemployment compensation laws.

What is Form 941?

Form 941 or the employer’s quarterly tax form serves the purpose of reporting the federal withholdings from most of the employees. In this form, an employer is supposed to report the number of employees, the amount of security money they have deposited, and all security and Medicare withholdings of the employee. It also reports the advances on the income credits earned by the employee.

This is used by an employer to report the income tax, Medicare tax, and security tax deducted from the payroll of an employee and also to pay the employer’s share of security and Medicare taxes. For the companies with annual payroll and liabilities that total to less than $1000, an alternate Form 944 is available, which is filed annually.

While filing a Form 941, you must report the total number of employees working under you, the total wagers that you paid, and the amount of taxes withheld by you to account for the total you reached for sending the IRS.

Main Differences Between Form 940 and Form 941

  1. Form 940 is used to Calculate the annual FUTA tax of a firm and is filed by an employer, while Form 941serves the purpose of reporting the federal withholdings from most of the employees.
  2. Form 940 is filed annually, whereas Form 941 is filed quarterly.
  3. The last date for filing a Form 940 is by the end of February, while the last deadlines for filing a Form 941 are April 30, July 31, October 31, and January 31 every year.
  4. Form 940 calculates the FUTA tax of a business for the previous year and also calculates any outstanding unemployment Taxes for the previous as well as the current year, while Form 941 is used to report the number of employees, the amount of security money they have deposited, and all security and Medicare withholdings of the employee.
  5. There are no exceptions for a Form 940, but Seasonal employers that do not pay wages to the employees for one or more quarters, household employees, and agricultural employees are the exceptions to Form 941.
  6. For the companies with annual payroll and liabilities that total to less than $1000, an alternate Form 944 is available, which is filed annually.

Conclusion

The appropriate filing of Forms that state the taxes paid by you and contribute to your development as an individual and to the development of your firm as a whole is really important. Various forms are often confused with one another, and hence the chances of errors increases which in turn increases the chances of levying heavy penalties on you. Hence, you must be well aware of the basic forms that you need to pay and all the documents and information that you need to keep handy while filing these forms.

References

  1. https://search.proquest.com/openview/97530b93088951ef6412b3491cb97c5e/1?pq-origsite=gscholar&cbl=41797
  2. https://search.proquest.com/openview/dd75ddd9379e2efaf42a22db390d488f/1?pq-origsite=gscholar&cbl=41797
x
2D vs 3D