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

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instructions for the adjustment for uncollected employee’s

information on electronic or magnetic media filing.

share of social security tax on tips.

An employee must report to you cash tips, including

Line 2—Total Wages and Tips, Plus Other

tips you paid the employee for charge customers, totaling

Compensation

$20 or more in a month by the 10th of the next month.

Enter amounts on line 2 that would also be included in

The employee may use Form 4070, Employee’s Report

box 1 of your employees’ Forms W-2. See the

of Tips to Employer, or submit a written statement.

Instructions for Forms W-2 and W-3 for details.

Do not include allocated tips on this line. Instead,

If you get timely notice from your insurance carrier

report them on Form 8027, Employer’s Annual

concerning the amount of third-party sick pay that it paid

Information Return of Tip Income and Allocated Tips.

to your employees, include the sick pay on line 2. If you

Allocated tips are not reportable on Form 941 and are not

are an insurance company, do not include sick pay that

subject to withholding of income, social security, or

you paid to policyholders’ employees here if you gave the

Medicare tax.

policyholders timely notice of the payments. See Pub.

Line 7a—Taxable Medicare Wages and Tips

15-A, Employer’s Supplemental Tax Guide, for details.

Report all wages and tips subject to Medicare tax. Also

Line 3—Total Income Tax Withheld

include any sick pay and taxable fringe benefits subject

Enter the income tax that you withheld on wages, tips,

to Medicare tax. See section 5 of Circular E (Pub. 15) for

taxable fringe benefits, and supplemental unemployment

information on types of wages subject to Medicare tax.

compensation benefits. An insurance company should

There is no limit on the amount of wages subject to

enter the income tax that it withheld on third-party sick

Medicare tax. If none of the payments are subject to

pay here.

Medicare tax, check the box in line 8. Include all tips

that your employees reported during the quarter, even if

Line 4—Adjustment of Withheld Income Tax

you were not able to withhold the employee’s share of

Use line 4 to correct errors in income tax withheld from

Medicare tax (1.45%). However, see the Line 9

wages paid in earlier quarters of the same calendar

instructions below.

year. You may not adjust or claim a refund or credit for

Line 9—Adjustment of Social Security and

any overpayment of income tax that you withheld or

deducted from an employee in a prior year. This is

Medicare Taxes

because the employee uses the amount shown on Form

Current period adjustments. In certain cases, amounts

W-2 as a payment when filing his or her income tax

reported as social security and Medicare taxes on lines

return. Because any amount shown on line 4 increases

6b, 6d, and 7b must be adjusted to arrive at your correct

or decreases your tax liability, the adjustment must be

tax liability. See section 13 of Circular E (Pub. 15) for

taken into account on line 17, Monthly Summary of

information on the following:

Federal Tax Liability, or on Schedule B (Form 941),

•

Adjustment for the uncollected employee share of

Employer’s Record of Federal Tax Liability. For details on

social security and Medicare taxes on tips.

how to report adjustments on the record of Federal tax

•

Adjustment for the employee share of social security

liability, see the instructions for line 17 (on page 4) or the

and Medicare taxes on group-term life insurance

instructions for Schedule B (Form 941). Explain any

premiums paid for former employees.

adjustments on Form 941c, Supporting Statement To

•

Adjustment for the employee share of social security

Correct Information, or an equivalent statement. See

and Medicare taxes withheld by a third-party sick pay

section 13 of Circular E (Pub. 15).

payer.

•

Note: You may adjust income tax withholding for

Fractions of cents adjustment.

quarters in earlier years only to correct an

Enter the adjustments for sick pay and fractions of

administrative error. An administrative error occurs if

cents in the appropriate line 9 entry spaces. Enter the

the amount you entered on Form 941 is not the amount

amount of all other adjustments in the “Other” entry

that you actually withheld. For example, if the total

space, and enter the total of the three types of

income tax actually withheld was incorrectly reported on

adjustments, including prior period adjustments

Form 941 due to a mathematical or transposition error,

(discussed below), in the line 9 entry space to the right.

this would be an administrative error. The administrative

Use parentheses (if possible) to show a net decrease to

error adjustment corrects the amount reported on Form

the amounts reported on lines 6b, 6d, and 7b. Provide a

941 to agree with the amount actually withheld from the

supporting statement explaining any adjustments

employees.

reported in the “Other” entry space.

Line 6a—Taxable Social Security Wages

Prior period adjustments. Use line 9 to correct errors in

Enter the total wages subject to social security tax that

social security and Medicare taxes reported on an

you paid to your employees during the quarter. Also

earlier return. If you report both an underpayment and an

include any sick pay and taxable fringe benefits subject

overpayment, show only the net difference.

to social security tax. See section 5 of Circular E (Pub.

Because any prior period adjustments shown on line 9

15) for information on types of wages subject to social

increase or decrease your tax liability, the adjustments

security tax. Enter the amount before deductions. Do not

must be taken into account on line 17, Monthly Summary

include tips on this line. Stop reporting an employee’s

of Federal Tax Liability, or on Schedule B (Form 941).

wages (including tips) after he or she reaches $87,900

For details on how to report adjustments on the record of

for 2004. However, continue to withhold income and

Federal tax liability, see the instructions for line 17, later,

Medicare tax for the whole year on wages and tips even

or the instructions for Schedule B (Form 941).

when the social security wage base of $87,900 is

reached. See the Line 7a instructions for Medicare tax. If

Explain any prior period adjustments on Form 941c.

none of the payments are subject to social security

Do not file Form 941c separately from Form 941.

tax, check the box in line 8.

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

providing necessary information and certifications

Line 6c—Taxable Social Security Tips

supporting the adjustments on lines 4 and/or 9 of Form

Enter all tips that your employees reported during the

941. If you do not have a Form 941c, you may file an

quarter until tips and wages for an employee reach

equivalent supporting statement with the return providing

$87,900 in 2004. Do this even if you were not able to

the required information about the adjustment(s). See

withhold the employee tax (6.2%). See the Line 9

section 13 of Circular E (Pub. 15).

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Instructions For Form 941 - Employer'S Quarterly Federal Tax Return - 2004 Page 3

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