Page 223 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
Example. The Red Herring Fish Company’s controller forgets to
file a quarterly Form 941, which would have shown a net tax due of
$2,200. Upon discovering the error 10 months later and filing the
return, the IRS penalizes the firm for five percent of the $2,200 due,

multiplied by five months, which is a 25 percent penalty, or $550.
It is possible to convince the IRS to mitigate or eliminate these
penalties if reasonable cause is proven. However, given the size of the
potential penalties, it is best to make the proper remittance of tax
deposits a high priority by the payroll staff.

Employer’s Quarterly Federal Tax Return
Form 941 must be filed by employers on a quarterly basis with the fed-

eral government.This form identifies the amount of all wages on which
taxes were withheld, the amount of taxes withheld, and any adjustments
to withheld taxes from previous reporting periods. If there is a shortfall
between the amount of withheld taxes on this form and the amount of
taxes actually withheld and deposited with the government during the
quarter, then the difference must accompany this form when it is sub-
mitted.Taxes to be reported on this form include income taxes withheld
from wages,including tips,supplementary unemployment compensation
benefits, and third-party payments of sick pay, plus Social Security and

Medicare taxes. An example of the form is shown in Exhibit 7.6.
Use the following steps to complete the form:
Line 1. Enter the number of employees on the payroll during the
pay period that includes March 12.This figure should not include
household employees or anyone who received no pay during
the period.

Line 2. Enter the total amount of all wages paid, which includes tips
and taxable fringe benefits, but not supplemental unemployment
compensation benefits and contributions to employee pension
plans that are not itemized as employee wages.

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