Instructions For Form 941 - Employer'S Quarterly Federal Tax Return

If you are a government employer, wages that you

line 5a (column 2)

line 5b (column 2)

pay are not automatically exempt from social security

line 5c (column 2)

and Medicare taxes. Your employees may be

CAUTION

line 5d

covered by law or by a voluntary Section 218 Agreement

with SSA. For more information, see Pub. 963,

6. Total taxes before adjustments

Federal-State Reference Guide.

Add the total federal income tax withheld from wages, tips,

5. Taxable social security and Medicare

and other compensation and total social security and

wages and tips

Medicare taxes before adjustments.

line 3

5a. Taxable social security wages. Report the total

line 5d

wages, sick pay, or fringe benefits subject to social security

line 6

taxes that you paid to your employees during the quarter.

For this purpose, sick pay includes payments made by an

7. TAX ADJUSTMENTS

insurance company to your employees for which you

received timely notice from the insurance company. See

Enter tax amounts on lines 7a – 7g that result from current

Section 6 in Pub. 15-A for more information about sick pay

or prior period adjustments. Use parentheses (if possible) to

reporting.

show an adjustment that decreases the total taxes shown on

line 6. Otherwise, use a minus sign. Do not enter an amount

Enter the amount before deductions. Do not include tips

on line 7f or line 7g unless the IRS has sent you a notice

on this line. For information on types of wages subject to

instructing you to do so.

social security taxes, see section 5 of Pub. 15 (Circular E).

Current period adjustments. In certain cases, you must

The rate of social security tax on taxable wages is 6.2

adjust the amounts you reported as social security and

percent (.062) each for the employer and employee or 12.4

Medicare taxes in column 2 of lines 5a, 5b, and 5c to figure

percent (.124) for both. Stop paying social security tax on

your correct tax liability for this quarter’s Form 941. See

and reporting an employee’s wages on line 5a when the

section 13 of Pub. 15 (Circular E). Do not attach Form 941c

employee’s taxable wages (including tips) reach $94,200

or an equivalent statement for current period adjustments.

during 2006. However, continue to withhold income and

If you need to adjust any amount previously reported on

Medicare taxes for the whole year on wages and tips even

lines 7a – 7c, use line 7e to report the adjustment and attach

when the social security wage base of $94,200 has been

Form 941c or an equivalent statement with an explanation.

reached.

7a. Current quarter’s fractions of cents. Enter

line 5a (column 1)

adjustments for fractions of cents (due to rounding) relating

.124

to the employee share of social security and Medicare taxes

line 5a (column 2)

withheld. The employee share (one-half) of amounts shown

in column 2 of lines 5a – 5c may differ slightly from amounts

5b. Taxable social security tips. Enter all tips your

actually withheld from employees’ paychecks due to the

employees reported to you during the quarter until the total

rounding of social security and Medicare taxes based on

of the tips and wages for an employee reach $94,200 in

statutory rates.

2006. Do this even if you were unable to withhold the

7b. Current quarter’s sick pay. Enter the adjustment

employee tax of 6.2%.

for the employee share of social security and Medicare

An employee must report cash tips to you, including tips

taxes that were withheld by your third-party sick pay payer.

you paid the employee for charge customers, totaling $20 or

7c. Current quarter’s adjustments for tips and

more in a month by the 10th of the next month. Employees

group-term life insurance. Enter adjustments for:

may use Form 4070, Employee’s Report of Tips to

•

any uncollected employee share of social security and

Employer, or submit a written statement or electronic tip

Medicare taxes on tips and

record.

•

the uncollected employee share of social security and

Medicare taxes on group-term life insurance premiums paid

Do not include allocated tips on this line. Instead, report

for former employees.

them on Form 8027, Employer’s Annual Information Return

of Tip Income and Allocated Tips. Allocated tips are not

Prior period adjustments. Use lines 7d – 7g to adjust

reportable on Form 941 and are not subject to withholding of

amounts reported on previous returns. If you need to

federal income, social security, or Medicare taxes.

report both an increase and a decrease for the same line,

show only the difference.

line 5b (column 1)

Adjustments you report here change your tax liability and

.124

line 5b (column 2)

your tax deposits. You will have to take these adjustments

into account on line 15 as Tax liability: Month 1; Month 2;

5c. Taxable Medicare wages and tips. Report all

Month 3 or on Schedule B (Form 941). You must explain

wages, tips, sick pay, and taxable fringe benefits that are

any prior period adjustments that you make on Form

subject to Medicare tax. Unlike social security wages, there

941c, Supporting Statement to Correct Information, or in an

is no limit on the amount of wages subject to Medicare tax.

equivalent statement.

Form 941c is not an amended return but is a statement

Include all tips your employees reported during the

providing the necessary information and certifications for

quarter, even if you were unable to withhold the employee

adjustments shown on lines 7d – 7g. Do not file Form 941c

tax of 1.45%.

separately from Form 941. See also section 13 of Pub. 15

line 5c (column 1)

(Circular E).

.029

7d. Current year’s income tax withholding. Enter

line 5c (column 2)

adjustments for the current year’s federal income tax

withholding. For example, if you made a mistake when

For more information, see section 6 of Pub. 15

withholding federal income tax from wages that were paid in

(Circular E).

earlier quarters of the same calendar year, adjust it here.

5d. Total social security and Medicare taxes. Add the

However, see the CAUTION below for adjustment of a prior

social security tax, social security tips tax, and Medicare tax.

year’s “administrative error” also shown on line 7d.

-5-

Instructions For Form 941 - Employer'S Quarterly Federal Tax Return - 2006 Page 5

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