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How to Fill out IRS Form 941: Simple Step-by-Step Instructions - YouTube
Channel: Fundera by NerdWallet
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How to Fill Out IRS Form 941
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Hi everyone, I'm Priyanka Prakash, senior
staff writer at Fundera.
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Today I'll show you how to fill out IRS Form
941.
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Form 941 is a form that businesses file quarterly
to report withheld income taxes from their
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employees’ wages, as well as the employer
and employees share of Social Security and
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Medicare taxes, which are together called
FICA taxes.
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In general, if you'll be paying wages of more
than $4,000 per year, giving you a tax liability
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of more than $1,000 per year, then you'll
need to submit Form 941 on a quarterly basis.
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Let's get started with the form.
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To begin, indicate the quarter for which you're
filling the form out.
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Form 941 is due on the last day of the month
following the period for which you're filing.
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For example, you’d file the form by April
30 to cover wages paid in January, February,
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and March.
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The other deadlines are July 31, October 31,
and January 31.
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In this case, I'm going to choose option 1.
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I'm filing by April 30 to cover wages paid
in January, February, and March.
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Then, you'll type in or right in your hand
filling the form your business’s EIN number,
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name and address.
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I'm going to provide this information for
a sample business.
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Since this is a US-based business, I'm going
to leave the bottom three boxes there blank.
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Okay, moving on to Part 1, which is the most
important part of the form because this is
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where you'll be providing compensation and
tax information.
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Remember that you should only be providing
numbers for the quarter that the filing covers.
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For instance, if you're filling out this form
for the April 30 deadline, you would only
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provide wage and withholding information for
January February and March.
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So, if you hired a new employee and started
paying them in April, that individual’s
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information should not appear on this form
for that filing.
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It's easy to break down wage and withholding
information by quarter if you use accounting
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software or payroll software.
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Start with the number of employees in line
1.
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These could be full time, part time, or seasonal
employees—anyone who received wages during
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the quarter, with the exception of independent
contractors, farm workers, and household employees.
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You should also exclude seasonal workers for
whom you did not pay any wages this quarter.
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In our example, we will pretend that we have
three employees for ABC Bakery LLC.
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In line 2, enter the gross amount of wages,
tips, and other types of compensation that
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those employees received.
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Compensation can include things like bonuses,
fringe benefits, and employee expense reimbursements.
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In this example, let's just assume for simplicity
sake that each of our three employees received
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$50,000 in total compensation, giving us a
grand total of $150,000 for the three employees.
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In line 3, you'll note the amount of federal
income taxes that you've withheld from your
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employees this quarter.
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Now, this amount will obviously depend on
each employee’s federal tax bracket, the
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choices they made on their W-4 withholding
form, as well as if they're using pre-tax
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money for any purpose like a retirement account.
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Again, if you use payroll software, that software
should easily show you how much federal income
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taxes you collectively withheld for the quarter.
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In this example, we'll just say that ABC Bakery
LLC withheld $30,000 dollars in total from
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all employees.
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In lines 5a to 5d, note down the total wages
that were subject to Social Security and Medicare
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taxes.
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Now, if none of the wages were subject to
Social Security or Medicare tax, you check
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off this box here next to line 4 and skip
down to line 6.
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But in most cases, most or all of the wages
that you've paid will be subject to Social
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Security and Medicare taxes.
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Under current law, the first $132,900 of an
employee's wages are subject to Social Security
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tax.
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But this wage limit changes, typically from
year to year so make sure you know the current
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limit as you go to fill out the form.
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If any employee’s wages exceed that limit,
the amount that you note in column 1, line
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5a will be smaller than the amount noted in
line 2.
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All wages are subject to Medicare taxes without
limit, and employees earning above $200,000
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per year pay a Medicare surtax.
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In this example, we’ll say that all of the
wages that ABC Bakery paid are subject to
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Social Security Taxes, so this number is going
to match up with what's in line 2.
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ABC Bakery did not pay any tips to employees.
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They are a tip-free business, so I'm going
to leave line 5b blank.
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And in line 5c, I'm going to put down the
$150,000 again because there's no limit on
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the wages that are subject to Medicare tax.
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None of ABC bakeries employees earned more
than $200,000 for the year, so I'm gonna leave
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box 5d blank as well.
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Now, Social Security, Medicare, and Medicare
surtax are three different tax rates, which
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the IRS has conveniently provided on the form
here for you, so you simply have to do the
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multiplication.
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If I multiply $150,000 by 0.124, I get $18,600.
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And if I multiply $150,000 by 0.029, I get
$4,350.
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Okay, and now I add up everything in column
2, and put it down in box 5e.
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That equals $22,950.
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You would skip line 5f unless the IRS has
sent you a section 3121(q) notice about unreported
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or underreported tips.
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In line 6, you'll need to add up lines 3,
5e, and 5f (if there's anything in the line
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5f box).
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So adding those up, I get $52,950.
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Line 7 to 9 are for positive or negative adjustments
that you might have to make to the amount
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of taxes that you owe.
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Adjustments that reduce the amount of taxes
should be indicated with a minus sign or parentheses.
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Fractions of cents is sometimes needed as
an adjustment because of rounding in your
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payroll system.
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The employee’s share of taxes might actually
be higher or lower than the amounts you've
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withheld.
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You might have to reduce the employee’s
share of taxes if you have an insurance company,
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or other third party which paid sick leave
benefits and withheld the taxes from employees’
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wages.
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And if you haven't finished collecting taxes
on employee tips or Group Term Life Insurance,
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that requires a negative adjustment as well.
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In our example, let's just make a $1.30 positive
adjustment due to rounding in our payroll
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system.
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If I account for that adjustment and add it
to line 6, I'm going to get $52,951.30.
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Line 11 actually lets businesses offset their
FICA taxes by claiming a credit for certain
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kinds of research activities.
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If this applies to you, and you can find out
if it does by reading the instructions on
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Form 8974, you would simply attach the filled
out Form 8974 to this form, note down the
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amount of the credit you're claiming, and
in line 12, subtract the credit from your
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tax due.
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In this case, I'm going to leave line 11 blanks
since ABC Bakery is not claiming a research
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credits.
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And line 12 is going to be identical to line
10.
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Line 13 has to do with tax deposits.
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In addition to filing Form 941 quarterly,
you'll also need to deposit withheld income
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taxes and FICA taxes on an ongoing basis.
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The deposit schedule is either monthly or
semiweekly depending on the size of your business's
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tax liability.
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Indicate here how much you deposited for the
quarter.
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Ideally, this should match up with line 12,
but you might have an underpayment or overpayment.
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If you have an underpayment, you pay the difference
either along with this form or through that
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Electronic Federal Tax Payment System (EFTPS),
and if you made an overpayment, the IRS will
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either send you a check as your refund or
apply the overpayment to your next return.
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These other forms that you see here are amended
returns.
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If you make a mistake on your Form 941, you
have to file 941-X, the amended version of
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the return.
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In this example, I'm going to say that ABC
Bakery had a $10 overpayment.
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So, I would indicate the amount of the overpayment
here in line 15.
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And in this case, since it's such a small
amount, ABC Bakery is just choosing to have
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the difference applied to their next return.
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Okay, on to Part 2, but first make sure you
note down your business name and EIN number
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at the top.
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This is just to ensure that the IRS does not
lose any of your paperwork.
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In Part 2, you'll provide information to the
IRS about your tax deposit schedule.
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As I said before, most employers must deposit
withheld income tax and the employee and employer’s
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share of Social Security and Medicare taxes.
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You'll either follow a monthly or semiweekly
deposit schedule, depending on the amount
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of taxes that you pay during a one-year look
back period, which is July 1 through June
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30.
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If your taxes during that period are $50,000
or less, than you’re a monthly depositor.
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If your taxes are more than $50,000 during
that period, you're a semiweekly depositor.
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In this example, we're going to assume that
ABC Bakery is on a semi weekly schedule, and
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we'll check off the bottom box.
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If you're on a monthly schedule, you would
check off this middle box here and break down
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your liability for each month of the quarter
and provide the total.
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That total must match the total that was in
line 12 of Part 1, and if it doesn't match
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up, go back and check your math because you
probably made an error somewhere.
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If you're a semiweekly schedule depositor,
you'll need to complete Schedule B for Form
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941 and attach it to this form.
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Part 3 only applies to you if you're closing
down your business, or if you have seasonal
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employees and don't file a return for every
quarter of the year because you don't employ
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people during every quarter of the year.
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I'm going to leave both of those blank since
neither of those apply to ABC Bakery.
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In Part 4, you need to indicate if you'd like
to allow your tax preparer, lawyer, or another
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third party to discuss your form with the
IRS.
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In this example, I'm going to assume that
the CEO of ABC Bakery personally filled out
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this form, so there's no need to allow another
person to discuss the form with the IRS.
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But in many cases, you might want to allow
your tax preparer or a lawyer to discuss this
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form on your behalf.
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Lastly, in Part 5, you'll need to provide
your name, your title, your phone number,
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and date and sign the form.
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You can only sign and date after you print
the form, so I'm going to leave those blank
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for now and just fill out the other information.
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We'll say Betty Business is filling out this
form for ABC Bakery, and she is the CEO of
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the business, and I'll provide her phone number.
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This last box is only relevant if you hired
somebody to fill out your form, and if that's
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the case, the paid preparer will need to sign
and provide their information here.
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The last page of Form 941 if you scroll down
to the bottom is a payment voucher.
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This is included in case you're sending in
payment of taxes along with your Form 941.
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Not all businesses are allowed to send in
payment with form 941.
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But, in some cases, if your tax liability
is pretty low, you can send in payment otherwise,
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most businesses make payments and deposits
with the electronic tax payment system.
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And that's it for Form 941 everyone.
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Thank you for watching.
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Follow https://fundera.com/blog to find more
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