How to Calculate Penalties and Interest on Form 941

Employers pay a penalty for not remitting withholding taxes on time.

Companies use IRS form 941 to report all income, Social Security and Medicare taxes that are withheld from employees' wages to the IRS on a quarterly basis. Failure on the company's part to file Form 941 correctly, or to remit withholding taxes on time, will result in penalties and interest charges. The penalties and interest are not calculated using form 941, but are calculated using information from the form.

Instructions

1. Calculate a two percent penalty for depositing the taxes up to five calendar days late. Multiply the amount on line 14 of Form 941 by .02 to find this amount.

2. Figure a five percent penalty for depositing the taxes six to 15 calendar days late. Multiply the amount on line 14 of Form 941 by .05 to find the penalty amount.

3. Pay a 10 percent penalty if you are depositing the taxes 16 or more calendar days late. Multiply the amount of line 14 of the 941 form by .10. This is the amount of your penalty charges.

4. Call the IRS to find out how much your penalty will be for filling out Form 941 or making the payment deposit incorrectly. This penalty amount can be up to 10 percent. Multiply the penalty percentage by the amount located on line 14 of Form 941 of the corrected quarterly filing.

5. Find out the amount of the Trust Fund Recovery penalty. If you intentionally didn't remit the quarterly employee taxes or didn't withhold them from employee wages, you will have to pay the Trust Fund Recovery penalty. This amount is determined by the IRS and can be up to 100 percent of the taxes that are due.

Tips & Warnings

• The taxes are officially late the day after they are due. Penalty amounts are calculated using the due date of the payment.

• If the due date falls on a Saturday, Sunday or legal holiday, the due date is the following business day.

References

• IRS: Form 941 Employer's Quarterly Federal Tax Return
• IRS: Instructions for Form 941