Small Businesses Should Use the Right Form When Filing Employment Tax Returns

Some small businesses pay employment tax quarterly while others may pay it just once a year.

Form 941

The IRS advises small business owners to review the rules for filing two commonly used employment tax returns. The two forms are:

  • Form 941, Employer’s Quarterly Federal Tax Return
  • Form 944, Employer’s Annual Federal Tax Return

These two forms are not interchangeable. A small business files one or the other. The employer should never flip-flop between the two forms on their own and should always file according to their designated filing requirement.

Here are some more details about these two forms.

  • Form 941, Employer’s Quarterly Federal Tax Return. Employers use Form 941 to:
    • Report income taxes, Social Security tax, Medicare tax and additional Medicare tax withheld from employee’s wages, tips and other compensation.
    • Claim employment tax credits and adjustments
    • Report the amount of employment taxes owed or claim an overpayment of employment taxes.
  • If the IRS advises the employer to file Form 941 quarterly, they must do so.

Form 944, Employer’s Annual Federal Tax Return

  • This form is for employers who owe $1,000 or less. It allows them to report employment tax liabilities only once a year, instead of quarterly.
  • This form can’t be used unless an employer receives official IRS notification that they are eligible to use this form.
  • Once the employer receives notice they can file Form 944, they must file this form every year.
  • They must continue to file Form 944, regardless of the tax they owe, unless the IRS notifies them differently.
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