Tax Preparation Help  
Instructions for Form 941-SS 2006 Tax Year

Specific Instructions:

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Part 1:Answer these questions for this quarter.

Employers in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands are not required to complete lines 2, 3, 6, 7d, 7f, 9, 10,
and 14.

1. Number of employees who received wages, tips, or other compensation for the pay period including:

Tell us the number of employees on your payroll for the pay period including March 12, June 12, September 12, or December 12 for the quarter indicated at the top of the return. Do not include:

  • household employees,

  • employees in nonpay status for the pay period,

  • farm employees,

  • pensioners, or

  • active members of the Armed Forces.

If you enter “250” or more on line 1, you must file Forms W-2 electronically. For details, call the SSA at 1-800-772-6270 or visit SSA's Employer Reporting Instructions and Information website at
www.socialsecurity.gov/employer.

4. If no wages, tips, and other compensation are subject to social security or Medicare tax . . .

If no wages, tips, and compensation are subject to social security or Medicare tax, check the box on line 4. If this question does not apply to you, leave the box blank. For more information about exempt wages, see section 12 of Pub. 80 (Circular SS) and section 4 of Pub. 15-A, Employer's Supplemental Tax Guide.

Caution
If you are a government employer, wages that you pay are not automatically exempt from social security and Medicare taxes. Your employees may be covered by law or by a voluntary Section 218 Agreement with SSA. For more information, see Pub. 963, Federal-State Reference Guide.

5. Taxable social security and Medicare wages and tips

5a. Taxable social security wages.   Report the total wages, sick pay, or fringe benefits subject to social security taxes that you paid to your employees during the quarter. For this purpose, sick pay includes payments made by an insurance company to your employees for which you received timely notice from the insurance company. See section 6 in Pub. 15-A for more information about sick pay reporting.

   Enter the amount before deductions. Do not include tips on this line. For information on types of wages subject to social security taxes, see section 4 of Pub. 80 (Circular SS).

  The rate of social security tax on taxable wages is 6.2 percent (.062) each for the employer and employee or 12.4 percent (.124) for both. Stop paying social security tax on and reporting an employee's wages on line 5a when the employee's taxable wages (including tips) reach $97,500 during 2007. However, continue to withhold Medicare taxes for the whole year on wages and tips even when the social security wage base of $97,500 has been reached.

  
line 5a (column 1)
x.124  
line 5a (column 2)

5b. Taxable social security tips.   Enter all tips your employees reported to you during the quarter until the total of the tips and wages for an employee reach $97,500 in 2007. Do this even if you were unable to withhold the employee tax of 6.2%.

  An employee must report cash tips to you, including tips you paid the employee for charge customers, totaling $20 or more in a month by the 10th of the next month. Employees may use Form 4070, Employee's Report of Tips to Employer, or submit a written statement or electronic tip record.

  Do not include allocated tips on this line. Instead, report them on Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips. Allocated tips are not reportable on Form 941-SS and are not subject to social security or Medicare taxes.

  
line 5b (column 1)
x .124  
line 5b (column 2)

5c. Taxable Medicare wages and tips.   Report all wages, tips, sick pay, and taxable fringe benefits that are subject to Medicare tax. Unlike social security wages, there is no limit on the amount of wages subject to Medicare tax.

  Include all tips your employees reported during the quarter, even if you were unable to withhold the employee tax of 1.45%.

  
line 5c (column 1)
x .029  
line 5c (column 2)

  For more information, see sections 4, 5, and 7 of Pub. 80
(Circular SS).

5d. Total social security and Medicare taxes.   Add social security tax, social security tips tax, and Medicare tax.

  
line 5a (column 2)
line 5b (column 2)
+line 5c (column 2)
line 5d  

7. TAX ADJUSTMENTS

Enter tax amounts on lines 7a, b, c, e, and 7g that result from current or prior period adjustments. Use a minus sign (if possible) to show an adjustment that decreases the total taxes shown on line 5d. Otherwise, use parentheses. Do not enter an amount on line 7g unless the IRS has sent you a notice instructing you to do so.

Current period adjustments.   In certain cases, you must adjust the amounts you reported as social security and Medicare taxes in column 2 of lines 5a, 5b, and 5c to figure your correct tax liability for this quarter's Form 941-SS. See section 8 of Pub. 80 (Circular SS). Do not attach Form 941c or an equivalent statement for current period adjustments.

  If you need to adjust any amount previously reported on lines 7a-7c, use line 7e to report the adjustment and attach Form 941c or an equivalent statement with an explanation.

7a. Current quarter's fractions of cents.   Enter adjustments for fractions of cents (due to rounding) relating to the employee share of social security and Medicare taxes withheld. The employee share (one-half) of amounts shown in column 2 of lines 5a-5c may differ slightly from amounts actually withheld from employees' paychecks due to the rounding of social security and Medicare taxes based on statutory rates.

7b. Current quarter's sick pay.   Enter the adjustment for the employee share of social security and Medicare taxes that were withheld by your third-party sick pay payer.

7c. Current quarter's adjustments for tips and group-term life insurance.   Enter adjustments for:
  • any uncollected employee share of social security and Medicare taxes on tips and

  • the uncollected employee share of social security and Medicare taxes on group-term life insurance premiums paid for former employees.

Prior period adjustments.   Use lines 7e and 7g to adjust amounts reported on previous returns. If you need to report both an increase and a decrease for the same line, show only the difference.

  Adjustments you report here change your tax liability and your tax deposits. You will have to take these adjustments into account on line 15 as Tax liability: Month 1; Month 2; Month 3 or on Schedule B (Form 941). You must explain any prior period adjustments that you make on Form 941c, Supporting Statement to Correct Information, or in an equivalent statement.

  Form 941c is not an amended return but is a statement providing the necessary information and certifications for adjustments shown on lines 7e and 7g. Do not file Form 941c separately from Form 941-SS. See also section 9 of Pub. 80 (Circular SS).

7e. Prior quarters' social security and Medicare taxes.   Enter adjustments for prior quarters' social security and Medicare taxes. For example, if you made a mistake when reporting social security and Medicare taxes on previously filed Forms 941-SS, adjust it here. If you need to report both an underpayment and an overpayment, show only the net difference.

  
Tip
If you are adjusting an employee's social security wages, social security tips, or Medicare wages and tips for a prior year, you must also file Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements.

7g. Special additions to social security and Medicare.   This line is reserved for employers with special circumstances. Use this line only if the IRS has sent you a notice instructing you to do so. You must attach Form 941c explaining the tax increase.

7h. Total adjustments.   Combine all adjustments shown on lines 7a, b, c, e, and 7g and enter the result here.

8. Total taxes after adjustments

Combine the amounts shown on lines 5d and 7h and enter the result here.

  • If line 8 is less than $2,500, you may pay the full amount with a timely filed return because you were not required to deposit. See section 8 of Pub. 80 (Circular SS) for information and rules about federal tax deposits.

  • If line 8 is $2,500 or more, you must deposit your tax liabilities by using the Electronic Federal Tax Payment System (EFTPS) or at an authorized financial institution with Form 8109. The amount shown on line 8 must equal the “Total liability for quarter” shown on Form 941-SS, line 15 or the “Total liability for the quarter” shown on Schedule B (Form 941).

Caution
If you are a semiweekly depositor, you must complete Schedule B (Form 941). If you fail to complete and submit Schedule B (Form 941), IRS will assert deposit penalties based on available information.

11. Total deposits for this quarter...

Enter your deposits for this quarter, including any deposits that you were required to make to cover prior period liabilities resulting from adjustments shown on line 7. Also include in the amount shown any overpayment from a previous period that you applied to this return.

12. Balance Due

If line 8 is more than line 11, write the difference in line 12. Otherwise, see Overpayment below.

You do not have to pay if line 12 is under $1. Generally, you should have a balance due only if your total taxes for the quarter (line 8) are less than $2,500. (However, see section 8 of Pub. 80 (Circular SS) for information about payments made under the Accuracy of Deposits Rule .)

If you are not required to deposit your taxes (see When and How Must You Deposit Your Taxes? on page 3), you may pay the amount shown on line 12 using EFTPS, credit card, check, or money order. Do not use a credit card to pay taxes that were required to be deposited. For more information on paying your taxes with a credit card, visit the IRS website at www.irs.gov and type “e-pay” in the Search box.

If you pay by EFTPS or credit card, file your return using the “Without a payment” address on page 2 under Where Should You File? and do not file Form 941-V(SS), Payment Voucher.

If line 8 is $2,500 or more and you have deposited all taxes when due, line 12 (“Balance due”) should be zero.

Caution
If you do not deposit as required and, instead, pay the taxes with Form 941-SS, you may be subject to a penalty.

13.Overpayment

If line 11 is more than line 8, write the difference in line 13. Never make an entry in both lines 12 and 13.

If you deposited more than the correct amount for a quarter, you can choose to have the IRS either refund the overpayment or apply it to your next return. Check the appropriate box in line 13. If you do not check either box, we will automatically refund the overpayment. We may apply your overpayment to any past due tax account that is shown in our records under your EIN.

If line 13 is under $1, we will send a refund or apply it to your next return only if you ask us in writing to do so.

Fill out both pages.

You must fill out both pages of Form 941-SS and sign it on the second page. Failure to do so may delay processing of your return.

Part 2:Tell us about your deposit schedule and tax liability for this quarter.

15. Check one:

  • If line 8 is less than $2,500, check the appropriate box in line 15 and go to Part 3.

  • If you reported $50,000 or less in taxes during the lookback period (see below), you are a monthly schedule depositor unless the $100,000 Next-Day Deposit Rule discussed in section 8 of Pub. 80 (Circular SS) applies. Check the appropriate box on line 15 and fill out your tax liability for each month in the quarter.

    +Month 1
    +Month 2
    +Month 3
    Total tax liability for quarter

    Note that your total tax liability for the quarter must equal your total taxes shown on line 8. If it does not, your tax deposits and payments may not be counted as timely.

    You are a monthly schedule depositor for the calendar year if the amount of your Form 941-SS taxes reported for the lookback period is $50,000 or less. The lookback period is the four consecutive quarters ending on June 30 of the prior year. For 2007, the lookback period begins July 1, 2005, and ends June 30, 2006. For details on the deposit rules, see section 8 of Pub. 80 (Circular SS).

    Caution
    This is a summary of your monthly tax liability, not a summary of deposits you made. If you do not properly report your liabilities when required or if you are a semiweekly schedule depositor and report your liabilities on line 15 instead of on Schedule B (Form 941), you may be assessed an “averaged” failure-to-deposit (FTD) penalty. See Deposit Penalties in section 8 of Pub. 80 (Circular SS) for more information.

  • If you reported more than $50,000 of taxes for the lookback period (see above), you are a semiweekly schedule depositor. Check the appropriate box on line 15.

    You must complete the Schedule B (Form 941) and submit it with your Form 941-SS. Do not use Schedule B (Form 941) if you are a monthly schedule depositor.

Reporting adjustments on line 15.    If your tax liability for any month is negative (for example, if you are adjusting an overreported liability in a prior period), do not enter a negative amount for the month. Instead, enter zero for the month and subtract that negative amount from your tax liability for the next month.

Here's an example:

Pine Co. discovered on February 6, 2007, that it overreported social security tax on a prior quarter return by $2,500. Its Form 941-SS taxes for the first quarter of 2007 were:

  January=   $2,000
  February=   $2,000
  March=   $2,000
         

Pine Co. reports liabilities on line 15 as follows:

Month 1= $2,000  
Month 2= 0  
Month 3= +$1,500  
Total $3,500  

The prior period adjustment ($2,500) offsets the $2,000 liability for February and the excess $500 must be used to offset March liabilities. Since the error was not discovered until February, it does not affect January liabilities reported in Month 1 of line 15.

Using the above example, if the overreported social security tax on a prior quarter return had been $10,000, Pine Co. could carry the excess negative adjustment of $6,000 ($10,000 - $2,000 - $2,000) to the next quarter. Pine Co. would only report $4,000 of the adjustment on line 7e because line 8 must equal the total shown in line 15.
See Form 941c for reporting requirements and information on the option of filing a claim for refund of overpaid employment taxes.

Part 3:Tell us about your business.

In Part 3, answer only those questions that apply to your business. If a question does not apply, leave it blank and go to Part 4.

16.If your business has closed . . .

If you go out of business or stop paying wages, you must file a final return. To tell IRS that a particular Form 941-SS is your final return, check the box on line 16 and enter the date you last paid wages in the space provided.

17.If you are a seasonal employer . . .

If you hire employees seasonally—such as for summer or winter only—check the box on line 17. Checking the box tells IRS not to expect four Forms 941-SS from you throughout the year because you have not paid wages regularly.

IRS will mail you two forms once a year after March 1. Generally, we will not ask about unfiled returns if you file at least one return showing tax due each year. However, you must check the box every time you file a Form 941-SS.

Also, when you fill out Form 941-SS, be sure to check the box on the top of the form that corresponds to the quarter reported.

Part 4:May we speak with your third-party designee?

If you want to allow an employee, a paid tax preparer, or another person to discuss your Form 941-SS with the IRS, check the “Yes” box in Part 4. Then tell us the name, phone number, and the five-digit personal identification number (PIN) of the specific person to speak with—not the name of the firm who prepared your tax return. The designee may choose any five numbers as his or her PIN.

By checking “Yes,” you authorize the IRS to talk to the person you named (your designee) about any questions we may have while we process your return. You also authorize your designee to:

  • give us any information that is missing from your return,

  • call us for information about processing your return, and

  • respond to certain IRS notices that you have shared with your designee about math errors and return preparation. IRS will not send notices to your designee.

You are not authorizing your designee to bind you to anything (including additional tax liability) or to otherwise represent you before the IRS. If you want to expand your designee's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization will automatically expire one year from the due date (without regard to extensions) for filing your Form 941-SS. If you or your designee want to terminate the authorization, write to the IRS office for your locality using the “Without a payment” address under Where Should You File? on page 2.

Part 5:Sign here— Who Must Sign the Form 941-SS?

Form 941-SS must be signed as follows.

•Sole proprietorship—   The individual who owns the business.

•Corporation (including an LLC treated as a corporation)—   The president, vice president, or other principal officer.

•Partnership (including an LLC treated as a partnership) or unincorporated organization—   A responsible and duly authorized member or officer having knowledge of its affairs.

•Single member limited liability company (LLC) treated as a disregarded entity—   The owner of the limited liability company (LLC).

•Trust or estate—   The fiduciary.

Form 941-SS may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been filed.

Alternative signature method.   Corporate officers or duly authorized agents may sign Form 941-SS by rubber stamp, mechanical device, or computer software program. For details and required documentation, see Rev. Proc. 2005-39. You can find Rev. Proc. 2005-39 on page 82 of Internal Revenue Bulletin 2005-28 at
http://www.unclefed.com/Tax-Bulls/2005/irb05-28.html.

Part 6:For PAID preparers only (optional)

You may complete Part 6 if you were paid to prepare Form 941-SS and are not an employee of the filing entity. Sign in the space provided and give the filer a copy of the return in addition to the copy to be filed with the IRS. Do not complete Part 6 if you are filing the return as a reporting agent and have a valid Form 8655, Reporting Agent Authorization, on file with the IRS.

How to Order Forms and Publications from the IRS

Phone number
Call 1-800-829-3676 (U.S. Virgin Islands only), or 215-516-2000 (toll call).

Access by computer
Visit the IRS website at www.irs.gov.

Previous | Index

2006 Instructions Main | 2006 Tax Help Archives | Tax Help Archives Main | Home