Year-end payroll compliance is an important responsibility for employers that can impact finances and reputation. As the filing deadlines for Form 941 (Q4) and Form 940 approach, missing those deadlines (or submitting inaccurate data) can lead to penalties, interest charges, and unwanted scrutiny.

For 2025 Q4, the Form 941 Q4 deadline falls on January 31, 2026, marking the last day an employer can properly file their quarterly federal tax return and remit withheld taxes for the year. Similarly, Form 940 must be completed before that same date.

Despite the importance, many businesses stumble. Common mistakes include misreporting total wages or tips, failing to reconcile withheld taxes and deposits, misunderstanding the credit rules for FUTA on Form 940, or using outdated versions of the forms.

In this article, you’ll find a thorough year-end employer checklist to guide hassle-free preparation for both Form 941 and Form 940 filings.

What is Form 941 (Q4)?

Form 941, also known as Employer’s Quarterly Federal Tax Return, is used by employers to report their payroll tax obligations each quarter to the Internal Revenue Service (IRS). This includes taxes withheld from employees (e.g., federal income tax) and the employer’s share of Social Security and Medicare contributions.

For Q4, you’re filing for the period covering October through December. The form contains the following information:

• The number of employees employed during the quarter.
• Total wages, tips, and other compensation paid to employees (including bonuses, commissions, etc.).
• The amount of federal income tax withheld from employee paychecks.
• The employee and employer portions of Social Security and Medicare taxes (FICA).
• Any adjustments such as taxable tips, sick pay, group-term life insurance, or rounding of cents.
• The total tax deposits already made, and whether there is a balance due or overpayment.

Businesses Required to File Form 941

Any business that pays wages to employees and withholds federal income tax, as well as pays Social Security and Medicare taxes, must file Form 941 each quarter. Some exceptions include:

• Employers whose total employment tax liability is very low (for example, $1,000 or less annually) and who have been designated by the IRS to use Form 944 instead.
• Agricultural employers and household employers, who may use other forms (such as Form 943 or Schedule H) rather than Form 941.

What is Form 940?

Form 940 is the annual federal tax return employers file to report and pay the federal unemployment tax (FUTA). The funds collected through FUTA help finance the federal oversight of state unemployment insurance programs and the payment of unemployment benefits to eligible workers.

Filing Form 940 ensures your business meets its legal tax obligations and supports the unemployment safety net.

Who Must File Form 940 and When?

Employers must file Form 940 if, during any calendar quarter in the current or preceding year, they paid $1,500 or more in wages to employees, or employed at least one person for 20 or more weeks (even non-consecutive weeks).

The typical due date is January 31 of the year following the tax year. For instance, wages paid in 2025 mean the Form 940 is due January 31, 2026 (or the next business day if that falls on a weekend/holiday).

How FUTA Tax Rates Are Determined

The standard FUTA tax rate is 6.0% on the first $7,000 of each employee’s annual wages. However, most employers claim a credit of up to 5.4% when they timely pay state unemployment taxes, reducing the effective federal rate to as little as 0.6%.

If the employer is in a state that has not repaid federal unemployment loans and is classified as a “credit-reduction state,” the allowable credit may be less, raising the employer’s net FUTA liability.

Filing Deadlines for Forms 941 (Q4) and 940 in 2026

Here are the main deadlines you must know when preparing for year-end filings:

Missing these deadlines can lead to interest and increased audit risk. In fact, late filings are one of the main compliance risks for employers.

Since Form 941 (Q4) and Form 940 deadlines fall on January 31, they coincide with other year-end obligations:

• Employers must issue employee Form W-2 statements and submit the transmittal Form W-3 to the Social Security Administration by January 31.
• Contractors paid at least $600 must receive their Form 1099 NEC by January 31, and the employer must file it with the IRS.

To stay compliant and avoid overlap issues, integrate all of these deadlines into your year-end payroll calendar. A strong compliance calendar is one of the most effective controls you can set up in your operations.

Year-End Payroll Reconciliation: Steps to Take Before Filing

As you wrap up the year, a solid year-end payroll reconciliation checklist can ensure your filings for Form 941 (Q4) and Form 940 are accurate, compliant, and ready for submission by January 31, 2026.

Let’s walk through the steps:

Review Payroll Records for Accuracy

Audit all gross wages, employee deductions, and taxes withheld throughout the year. Verify that amounts paid align with payroll registers, and that deductions for benefits, retirement contributions, and other withholdings were correctly applied.

Inaccuracies here will affect your filings and trigger IRS penalties. Automated payroll systems can help you reduce manual entry errors and reconciliation gaps.

Match Quarterly Filings to Year-End Totals

Compare your quarterly payroll tax filings with year-end totals. For example, ensure that what you submitted on Forms 941 for Q1–Q3 plus the Q4 submission equals the annual totals you intend to report.

Identify and correct any discrepancies before filing. This step prevents situations where the sum of quarterly filings doesn’t match the annual expectations from your W-2s, 941s, and 940s.

Verify Employee and Contractor Information

Accuracy of SSNs (for employees), EINs (for contractors when applicable), names, and addresses is important. Mistyped SSNs, mismatched names, or missing EINs for contractors can lead to rejected filings or notices from the IRS.

Link back to your payroll system or HR records, and ensure everything is current and correct.

Reconcile Form 941 Totals with Forms W-2 and W-3

Your Q4 Form 941 must align with what you report via Forms W-2 (employee wage and tax statements) and your Form W-3 (transmittal) to the Social Security Administration. Confirm that total wages, tax withholdings, and employer taxes on 941 match W-2 summary figures.

Resolve any mismatch now; corrections post-filing are time-consuming and increase risk.

Double-Check Tax Deposits Made Throughout the Year

Verify that all federal tax deposits (income tax withholding, Social Security, Medicare, FUTA when applicable) were made and recorded correctly. Late or missing deposits may incur interest or penalty charges.

Cross-check your bank records, payroll system reports, and IRS payment acknowledgments. Automated systems integrated with payroll can simplify deposit tracking and reduce the reconciliation burden.

Step-by-Step Checklist for Filing Form 941 (Q4)

Follow this clear, actionable checklist to reduce errors, ensure timely deposits, and stay audit-ready when filing Form 941 for the fourth quarter:

Gather payroll records for Q4 (October–December 2025)

Start by pulling together your payroll registers, wage summaries, withholding logs, and deposit confirmations covering payments from October 1 through December 31, 2025. Having all source documents in one place streamlines the process.

Verify total wages, tips, and other compensation

On Form 941, you must report the total number of employees paid and the aggregate wages, tips, and other taxable compensation for Q4. Review your payroll register line-by-line: wages, bonuses, commissions, allocated tips.

Discrepancies between payroll software output and the register often point to missing entries that you must capture before filing.

Confirm the amounts of federal income tax withheld

From your payroll reports, compile the total federal income tax you withheld from all employees during Q4. This figure must align with what you deposited (via EFTPS or an electronic system). If deposit totals and withheld taxes diverge, you’ll need to investigate before submitting.

Calculate Social Security and Medicare taxes (including employer share)

Next, compute the FICA taxes for both employees and employers:

• Social Security tax (employee + employer portion) on wages up to the SSA wage base.
• Medicare tax (employee + employer) on all wages. Include any additional Medicare surtax where applicable.

Report adjustments (e.g., sick pay, tips, group-term life insurance)

If you had taxable sick pay, employer-paid group-term life insurance over $50,000, or uncollected Social Security/Medicare on tips, those adjustments must be reported on the proper lines of Form 941. Even minor rounding (fractions of cents) should be captured.

Confirm tax deposits match totals due

Compare your calculated total tax liability for Q4 with the amounts actually deposited during the quarter. If your deposits are less than your liability, you must indicate the balance due on the form.

On the other hand, if you over-deposited, you may request that the overpayment be applied to the next quarter or obtain a refund. The IRS emphasizes that Form 941 "ties your payroll withholdings to the deposits you make throughout the quarter."

Make sure your deposit records (EFTPS printouts, bank confirmations) are present and stored.

Sign and file electronically or by mail

Complete the employer identification section, select the correct quarter (“Q4”), fill out all the sections, sign the form (or for e-file, follow the IRS e-signature requirements), and submit.

Electronic filing is recommended for speed and lower error risk. If filing by paper, use the correct mailing address and allow extra days for delivery.

Retain copies for records

After filing, keep a full copy of the submitted Form 941, deposit confirmations, and underlying payroll records. The IRS recommends retaining employment tax records for at least 4 years. Proper record-keeping positions you well in case of an audit or notice.

Step-by-Step Checklist for Filing Form 940 (Year-End FUTA Return)

The Form 940 year-end filing steps below will give you a clear checklist that will help ensure your business stays compliant, minimizes penalties, and keeps accurate records:

Gather total payments to employees during 2025

Collect your full wage and compensation records for the calendar year. Include all amounts paid to employees (wages, bonuses, commissions, etc.). You’ll need this information to determine whether you met the threshold for filing and to calculate your tax base.

Identify exempt payments

Identify payments that do not count toward the FUTA wage base. For example, certain fringe benefits, employer-paid group health insurance, and retirement plan contributions may be excluded. The wage base is limited to taxable wages under FUTA rules.

Determine FUTA tax liability

Once you have your taxable wages, you apply the FUTA wage base limit: for most employees, only the first $7,000 of wages per employee in the calendar year are subject to the federal unemployment tax.

The standard FUTA rate is 6%, but you may qualify for a credit of up to 5.4% (reducing your effective rate to 0.6%) if your state unemployment tax payments are timely.

Calculate adjustments for credit reduction states

If your business operates in or has employees in a “credit reduction” state, one in which the state has a Title XII loan outstanding, you must adjust your FUTA credit entitlement, and therefore, your liability can be higher. Employers in these states face a reduction in FUTA credit on their Schedule A (Form 940).

Verify federal unemployment tax payments made during the year

If your FUTA liability exceeded $500 in a calendar quarter, you are required to have deposited that amount during the year. Before filing, check your deposit history and ensure any remaining balance is captured on the return.

Reconcile discrepancies between actual deposits and your calculated liability to avoid interest or penalties.

File electronically and submit any remaining payment

Once calculations are complete, file your Form 940 by the due date (typically Jan 31 of the year following the wage year) either via electronic filing or paper submission. If a balance remains after your quarterly deposits, submit it with the return.

Maintain FUTA records for at least 4 years

Ensure you keep all supporting documents: employee wage records, state unemployment tax filings, deposit confirmations, and copies of Form 940, for at least four years as required by the IRS.

Integrating W-2, 1099, and Payroll Tax Compliance

Your payroll tax filings reflect what you paid employees and contractors during the year, what taxes you withheld or paid as an employer, and what you’ll report to the IRS. A mismatch between one document and another can trigger penalties, audits, or additional scrutiny.

Before you submit your final Q4 Form 941, ensure the total wages, federal income tax withheld, Social Security, and Medicare withholdings for Q4 roll into your W-2s and the corresponding Form W-3.

Any discrepancy between the amounts on your W-2s and what you reported on Form 941 can lead to trouble. For example, if you misclassified wages or forgot to include a bonus, your W-2/W-3 totals won’t match what’s in your quarterly returns.

Ensure 1099-NEC Totals Match Contractor Payments

If you worked with independent contractors, your Form 1099 NEC filings must reflect the actual payments made during the calendar year. While Form 941 covers employee wages and employer taxes, 1099s represent payments to non-employees, and those figures often feed into your tax planning and liability estimates.

Misreporting contractor payments can complicate your employer tax status and even affect how the IRS sees worker classification.

Simplify Year-End Payroll Compliance: How Startups Master Forms 941 and 940 Without the Headache

Startups face a serious challenge: meeting the January 31, 2026, deadlines for Form 941 (Q4) and Form 940 while scaling their business. Missing these filings triggers penalties, interest charges, and IRS scrutiny.

Instead of hiring a full-time operations team at $90K+ annually or spending 38+ hours monthly tackling complex tax regulations, forward-thinking startups partner with fractional operations specialists who handle the entire year-end payroll process.

With expert support, your startup gains automated payroll reconciliation, error-free FUTA calculations, seamless W-2/1099 alignment, and on-time electronic filing; all managed through pre-built compliance checklists and SOPs.

Your dedicated operations partner tracks deposit confirmations, reconciles quarterly totals, verifies employee data accuracy, and ensures every form aligns perfectly before submission.

This approach transforms year-end tax compliance from a scramble into a streamlined, predictable process, thereby allowing you to focus on revenue growth rather than reconciliation spreadsheets.

Ready to eliminate payroll compliance stress? Book a demo with Chore and discover how fractional operations experts can handle your Forms 941, 940, W-2s, and 1099s, saving you time, money, and penalties.

FAQs

What is Form 941 (Q4) and who needs to file it?

Form 941, Employer’s Quarterly Federal Tax Return, is used by employers to report income taxes, Social Security tax, and Medicare tax withheld from employees’ paychecks. Every employer that pays wages subject to these taxes must file a return each quarter. The Q4 version specifically covers wages paid between October 1 and December 31, 2025.

What is Form 940, and when is it due?

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, reports the federal unemployment tax employers pay to fund unemployment compensation. The filing deadline for the 2025 tax year is January 31, 2026. If all FUTA taxes were deposited on time throughout the year, the IRS would extend the due date to February 10, 2026.

What is the difference between Form 941 and Form 940?

Form 941 is filed quarterly and covers federal income, Social Security, and Medicare taxes withheld from employees’ wages. Form 940, on the other hand, is filed annually and reports the employer’s FUTA tax, which funds federal unemployment benefits.

What information do I need before filing Form 941 (Q4)?

Here is the information you need before filing Form 941 (Q4):

• Total wages, tips, and other compensation for Q4
• Federal income taxes withheld
• Social Security and Medicare taxes (employee + employer portions)
• Adjustments for sick pay, tips, or group-term life insurance
• Proof of all tax deposits made during the quarter