How to Do the Quarter System for Payroll

Employers must submit quarterly payroll tax reports to the IRS and state authorities.

Employers in the United States must report payroll data to federal and state agencies every quarter. The IRS requires most businesses to remit their payroll taxes on a monthly basis and submit a Form 941 payroll tax return at the end of each quarter. State unemployment taxes are payable quarterly. You can use your accounting software to calculate the amounts due, or do it by hand using a calculator. Hiring a payroll processing company to file the quarterly reports is a popular choice for big companies or employers who find the payroll tax reporting system too complex.

Instructions

Federal Quarterly Reports

1. Fill out the enrollment form on the IRS Electronic Federal Tax Payment System website at EFTPS.gov. You will need to provide information about your business, your tax I.D. number, plus bank account and routing number. Call 800-982-3526 to get a temporary password once you receive your PIN in the mail.

2. Make sure each employee is set up in your payroll software with the correct number of dependents and that your software will accurately calculate federal income tax (FIT), Social Security (FICA) and Medicare withholding. Alternatively, calculate the deductions by hand using the federal withholding percentages shown on IRS.gov. Check the percentages with the IRS as these amounts change periodically. Companies using software systems must obtain regular updates.

3. Remit your payroll taxes on a monthly basis. Print out the payroll tax liability report at the end of each month using your computerized accounting software, or alternatively total up the FIT, FICA and Medicare amounts withheld from all your employees' paychecks. Add the matching amounts for the FICA and Medicare payable by your company. Log on to EFTPS.gov and follow the instructions to pay your payroll taxes. Print a copy of the receipt and keep it in a file folder marked "941 Payments" and the current year.

4. Go to IRS.gov at the end of each quarter (January to March, April to June, July to September and October to December) and search for Form 941. Follow the instructions on the form, using the amounts of your three monthly payroll tax submissions for the quarter. Keep a copy of the form for your records and attach the three monthly remittance reports to it. Mail the form to the address shown on the instructions. If you have not paid your payroll tax during the quarter, include the voucher 941-V and enclose your check for the full amount. Your computerized accounting software may also provide a Form 941.

Quarterly State Unemployment Reports

1. Obtain a state employer's identification number from your state's employment authority listed on IRS Publication 926.

2. Obtain a copy of your state's online or printed form for state unemployment tax, or SUTA. Enter the name and gross payroll amount for each employee for the preceding quarter, and follow the instructions on the form to calculate the amount of SUTA due.

3. Mail in the form with your check or submit the form online with your electronic payment. Keep a copy in a file folder marked "State Quarterly Unemployment" and the current year.

4. Keep copies of your quarterly returns handy. Workers' compensation auditors usually request them.

Tips & Warnings

• Special exemptions may exist for new hires. Check with the IRS.

• People who work as independent contractors are not employees and no tax withholding or reporting is required for them.

• Be sure your computer's payroll module is up to date and has the correct percentages entered into it.

References

• EFTPS
• IRS: Form 941
• IRS: State Unemployment Authorities