One of the most important responsibilities for any business is ensuring year-end payroll compliance. Miss the proper filings, or file late, and you risk serious penalties, unnecessary interest, and even IRS audits. With Q4 (October to December) work covered by your final payroll filings, there is no time to procrastinate.

The fourth quarter is the last chance to reconcile your annual totals and wrap up tax obligations. Form 941 captures wages, including Social Security and Medicare taxes for Q4, and Form 940 reports your annual federal unemployment (FUTA) liability.

In this article, you’ll get all you need to sail through your January 2026 deadlines smoothly. We’ll break down key dates, walk you through best practices, and deliver a step-by-step December prep checklist to minimize risk.

An Overview of Q4 Payroll Tax Responsibilities

When we talk about Q4 payroll filings, we mean the tax and reporting obligations tied to wages paid between October 1 and December 31 of a calendar year. These filings ensure withheld federal income taxes, Social Security and Medicare (FICA), and unemployment withholdings are reconciled and reported to the IRS.

Since Q4 marks the end of the year, it’s also the period where employers must confirm year-to-date totals before important annual filings and ensure no discrepancies carry over into the new year.

Employer Responsibilities in Q4

As an employer, your obligations include:

• Withholding and depositing payroll taxes: You must withhold the correct amounts for employee federal income tax, Social Security, and Medicare, and remit your employer share.
• Reporting via Form 941: You report quarterly employment taxes, including withheld income tax and FICA contributions.
• Calculating and preparing for FUTA/ annual unemployment taxes: Your Q4 numbers feed into the annual Form 940 filing.
• Reconciliation and validation: Ensure your internal payroll system, deposits, and reported withholdings align perfectly; reconcile any discrepancies ahead of filing deadlines.
• State-level compliance: Don’t forget state withholding and unemployment (SUTA) obligations. Chore helps manage SUTA rate changes and state filings seamlessly, so you don’t miss state-level deadlines or misapply rates.

Filing Deadlines for 2026

Here’s what you must know for Form 941 and Form 940, along with a calendar breakdown and notes on e-filing vs. paper filing timing.

Form 941 Deadline (Quarterly Return)

The 2026 Q4 Form 941 deadline is January 31, 2026 (for wages paid through December 31, 2025). If January 31 falls on a weekend or holiday, the due date shifts to the next business day under IRS rules.

Many modern payroll systems and accounting suites integrate e-filing and payment, reducing errors and saving time. If you file on paper instead, you must check your IRS “Where to File” address (which depends on your business location and whether you include a payment).

Form 940 Deadline (Annual FUTA Return)

Employers must file Form 940 for the year 2025 by January 31, 2026. Even though Form 940 is annual, it covers the FUTA liability for all four quarters, including Q4, so it shares the same January 31 due date.

If you deposited all FUTA liabilities timely during the year (using IRS deposit rules), you simply include that information in the Form 940.

E-Filing vs. Paper Filing

E-filing is by far preferred for speed, accuracy, and automatic IRS receipt tracking. As contained in our “How to File Form 941” guide, e-filing and electronic payment streamlines the full workflow and cuts down on mismatches between deposits and returns.

Paper filing should only be used in rare cases (e.g., extremely small firms or emergencies). If you mail your returns, allow extra transit time, confirm the correct postal address, and ideally send via tracked or certified mail.

Since e-filed returns generally post faster, you may want to finalize your data a few days early, schedule your EFTPS or other tax payment to post before January 31, and review confirmation receipts carefully.

What is Form 941?

Form 941, formally known as the Employer’s Quarterly Federal Tax Return, is the IRS’s main mechanism for reconciling several key components of payroll tax liability. It serves to report:

• Federal income tax withheld from employees’ wages
• Employee and employer shares of Social Security and Medicare (FICA) taxes
• Adjustments (tips, sick pay, fractions of cents) and eligible credits (e.g., R&D credits via Form 8974)
• Comparison of deposits made during the quarter vs. what was owed

Every employer paying wages subject to federal withholding or FICA generally must file Form 941 every quarter, even if there were no wages in that period (you’d file a “zero return”).

Some small employers (those with minimal total tax liabilities) may qualify to file Form 944 (annual) instead, but only if the IRS has directed so in writing; otherwise, Form 941 remains compulsory.

Special employer types (e.g., agricultural, household) use different forms (Form 943, Schedule H, etc.).

Section-by-Section Overview of Form 941

Below is a breakdown of the main parts of Form 941:

• Header and Identification: Business name, Employer Identification Number (EIN), address, and quarter being reported.
• Part 1 - Wages, Taxes, and Withholdings: Report total wages, withheld federal income tax, then compute Social Security and Medicare taxes (employee and employer). Subtract any adjustments (tips, sick pay, group-term life insurance). Apply allowable credits (for example, R&D credits via Form 8974) to reduce your liability.
• Part 2 - Tax Liability Schedule / Deposit Allocation: If you are a monthly depositor, you simply allocate totals. If you are under a semiweekly deposit schedule, you use Schedule B to list daily tax liabilities that justify deposit timing.
• Parts 3 and 4 - Special Situations / Designated Contact: Part 3 is used if wages were zero, or if you are a seasonal employer. Part 4 lets you designate a third party (e.g., payroll provider) to speak with the IRS about the return.
• Part 5 - Signature / Declaration: Authorized officer signs, and if a tax preparer is used, their information goes here.

Filing Tips and Best Practices

• Use e-filing when possible: It’s faster, more secure, and often reduces processing risk. Many payroll software tools integrate IRS e-filing.
• Reconcile early and often: Don’t wait until the deadline. Monthly or weekly reconciliations of payroll, deposits, and reports help catch mistakes early.
• Automate where you can: Payroll software or services help ensure correct calculations, required attachments (Schedule B, 8974), and on-time filing.
• Document supporting evidence: Keep payroll reports, timesheets, credit documentation, and deposit confirmations in case of audit.
• Plan for amendments: If you discover a mistake later, file Form 941-X within the allowed timeframe to correct it.

Payroll Deposit Requirements Before Filing

Before you even file Forms 941 or 940, you must ensure your payroll tax deposits are accurate, timely, and properly recorded. Let’s break down the important aspects: deposits vs. reporting, IRS deposit schedules, reconciling deposits with your filings, and common penalties to watch out for.

Deposits vs. Reporting

Deposits are the actual payments you transmit to the IRS (or state agencies) for withheld income taxes, Social Security, and Medicare. Reporting (on Forms 941 and 940) is where you declare what you withheld and paid. Simply filing without making proper deposits (or vice versa) can trigger penalties.

IRS Deposit Schedules

The IRS uses two deposit schedules for payroll taxes: monthly and semi-weekly.

• Monthly schedule: If your tax liability was $50,000 or less in the lookback period, you deposit by the 15th of the following month.
• Semi-weekly schedule: If your liability is over $50,000 in the lookback period, you deposit more frequently: Wednesdays or Fridays, depending on your payroll day.

Choosing the wrong schedule or missing a deposit deadline can lead to interest, penalties, and red flags with the IRS.

Matching Deposits with Filings

On Forms 941 and 940, the amounts you report must reconcile with the deposits you’ve made. Before filing, run a reconciliation: compare your payroll system’s withholding totals to your deposited amounts.

Any discrepancy must be explained or corrected (e.g., via adjustment or amended return). If you use a payroll provider or platform, confirm they’ve recorded and submitted deposits correctly. Our guide on setting up payroll systems emphasizes establishing this kind of audit trail early to avoid surprises.

December Payroll Prep Checklist (Step-by-Step)

As the year gradually comes to an end, December is your final opportunity to ensure accuracy before you file your Q4 returns. Here is a step-by-step checklist to ensure Form 941 and Form 940 filings go smoothly come January.

Year-to-Date Payroll Reconciliation

Start by reconciling all payroll activity from January through the end of December:

• Compare your payroll ledger, general ledger, and payroll system totals (wages, taxes withheld, deductions) to ensure consistency.
• Look for anomalies or adjustments late in the year (bonuses, retroactive pay, corrections) and confirm they’ve been captured properly.
• Cross-check your records against quarterly reports you’ve already filed to detect discrepancies early.
• If you use a third-party payroll or accounting service like Chore, now is a good time to review their summary reports and confirm that their totals align with your internal books (see our guide for tips on outsourcing payroll and controlling compliance risk).

Verify Social Security and Medicare Wage Limits

By December, many employees may hit the annual wage base limits for Social Security (in 2026, subject to IRS updates). For those who exceed the threshold:

• Confirm that you have correctly ceased additional Social Security withholding beyond the wage base limit.
• Ensure Medicare withholding continues (since there is no wage cap for Medicare).
• Reconcile any pre-tax benefits or imputed income that could affect the taxable wages base.
• Monitor high earners, bonuses, commissions, or one-time payouts near year-end.

Failure to manage these rules correctly can lead to over-withholding or underreporting and trigger IRS notices after filing.

FUTA Liability Check

As part of preparing for your annual FUTA return (Form 940):

• Calculate the total wages subject to FUTA in 2025 after allowable adjustments and credits.
• Confirm whether you qualify for the 5.4% credit reduction (if your state unemployment taxes weren’t paid timely or you didn’t meet state requirements).
• Compare your projected FUTA liability with what you’ve reserved or accrued internally.
• If using software or payroll outsourcing, ensure the FUTA settings are correctly configured for your state.

This “pre-check” ensures you won’t underpay or overestimate your FUTA obligation when the time comes to file.

Employee and Contractor Data Accuracy

Audit your personnel data:

• Verify all employee names, Social Security Numbers, and addresses for accuracy. These will carry over to W-2s and reconciled forms.
• Confirm employee classification: ensure that any contractor you’ve treated as a 1099 contractor is correctly classified (misclassification can lead to penalties).
• Cross-check contractor addresses and TINs (Taxpayer Identification Numbers).
• If any changes occurred (name changes, SSN corrections, re-hires), document and update your system before year-end.

Well-maintained data reduces the chance of IRS rejection, delayed processing, or audits.

Backups and CPA Coordination

Ensure your data and relationships are in order before the year’s end:

• Back up your payroll files, both raw data and final reports, in secure, redundant formats.
• Save all supporting documents (timecards, benefit elections, adjustment memos, contractor invoices).
• Schedule a year-end review meeting with your CPA or tax advisor to run through last-minute adjustments, strategies, or compliance risks.
• Share copies of your reconciled ledgers, spreadsheets, and payroll forecasts with your advisor so they’re prepared to assist with the January filings.

Filing Options and Best Practices

When it’s time to file Forms 941 and 940, your method can affect speed, accuracy, and your ability to correct errors. Here’s how to choose wisely:

E-file vs. Paper Filing

Electronic filing (e-file) is preferred by the IRS and most payroll professionals. E-filing systems auto-validate data, flag common errors, and deliver an acknowledgement in about 24 hours, giving you a prompt window to correct and resubmit. That “fast feedback loop” helps avoid rejected returns or surprise IRS notices.

Paper filing remains an option for some small employers, but it’s slower, more error-prone, and subject to mailing delays. Choosing the wrong processing center or forgetting to include a payment voucher can backfire.

If you ever must go paper, always verify the correct “Where to File” address for your state before dropping the return in the mail.

Payroll Software Tools

Modern payroll software simplifies payroll tax compliance. Most tools calculate wages, withhold taxes, generate Form 941/940 drafts, and support direct e-filing. Some platforms even auto-sync deposit records to ensure your filed amounts mirror what was deposited.

In fact, Chore integrates with major payroll stacks to centralize compliance. Our guide on filing Form 941 sheds more light on how automation reduces mistakes.

When evaluating payroll software, look for:

• Tight integration with EFTPS or other IRS-approved payment gateways
• Automatic updates to tax tables
• Strong audit trails and version history
• Built-in correction workflows (e.g., 941-X)

Recordkeeping Best Practices

Keep detailed payroll registers, deposit receipts, copies of filed returns, and documents that justify any adjustments (e.g., fringe benefit exclusions). The IRS typically requires retention of payroll tax records for at least 4 years, though many firms keep them 7 years or more.

Use digital backups or cloud storage to guard against data loss, and ensure your system tracks who made edits and when. 

Fixing Missed Deadlines or Errors

If you miss a deadline or discover a mistake, act fast. For minor errors on a filed 941 or 940, file a correction (Form 941-X or 940-X) as soon as possible. The IRS allows adjustments within specific windows.

If the return was late entirely, consider requesting penalty abatement (especially for first-time or minor offenses). For late deposits, the IRS imposes harsher daily penalties, so corrections and payments should be prioritized.

In severe situations (e.g., large tax balances or repeated misses), outsourcing to a trusted provider, like Chore, can help you manage IRS negotiations, avoid repeated errors, and rebuild compliance discipline.

IRS Penalties and How to Avoid Them

Here’s a closer look at the IRS’s penalty structure and how to reduce risk:

Penalties for Late Form 941/ 940

• Failure to file: If you don’t submit the return on time, the IRS charges 5% of the unpaid tax per month or part of a month, up to a maximum of 25%.
• Failure to pay: For taxes shown but not paid on time, the penalty is 0.5% per month (or part thereof), again capped at 25%.
• On Form 941, when late filing and late payment penalties apply in the same month, the failure-to-file penalty is reduced by 0.5%, resulting in a total of 5% (i.e., 4.5% + 0.5%).
• For failure to deposit (i.e., delayed or insufficient payroll tax deposits), penalties range from 2% to 15%, depending on how late the deposit is.
• In the case of Form 940, late filing carries 5% per month (capped at 25%), and unpaid FUTA tax may also incur a 0.5% monthly penalty.

Penalty Abatement Requests

If you believe your late filing or late payment was due to reasonable cause (natural disaster, illness, record loss), you may request relief via penalty abatement. Use Form 843 for many penalties, or reply to the IRS notice with a written explanation. Show you acted in good faith and that you made all reasonable efforts to comply.

Here’s how to avoid the penalties:

• Follow IRS deposit schedules strictly to avoid failure-to-deposit penalties.
• Don’t wait until January 31; efile as soon as your data is reviewed.
• Use reliable payroll software or services. Chore provides tools and compliance oversight that reduce risk from human error.
• Keep supporting documentation, reconciliations, and audit trails.
• If you get a penalty notice, act quickly. Submit your abatement request or appeal before the deadline lapses.

Simplify Q4 Payroll Compliance with Chore's Expert Operations Team

Q4 filings require accuracy that most founders don't have time for. Instead of drowning in Form 941 worksheets, FUTA calculations, and deposit reconciliations, delegate the entire process to Chore's fractional operations experts.

Here's how startups win with Chore:

• Automated Compliance Management: Your dedicated Chore CEO handles payroll tax deposits, year-end reconciliations, and timely e-filing of Forms 941 and 940, thereby eliminating the risk of penalties that can cost startups $50K+ annually.
• Pre-Built Systems: Access proven templates, checklists, and SOPs for December prep; from wage limit verification to FUTA liability checks.
• Seamless Integration: Chore connects with your existing payroll platforms in just two hours, then manages ongoing compliance while you focus on growth.
• Cost-Effective Expertise: Save $6K and 38 hours monthly compared to hiring internal operations staff or struggling through complex tax requirements yourself.

Don't let Q4 payroll filing hinder your startup's growth. Chore's operations experts ensure you meet every January deadline with zero stress.

Book a demo with Chore and free yourself from year-end payroll admin.

FAQs

What happens if I miss the January 31, 2026, filing deadline?

Here’s what the IRS can do if you miss the January 31, 2026, filing deadline for Form 941 or Form 940:

• Failure-to-file penalty: 5% of the unpaid tax for each month (or part of a month) your return is late, up to a maximum of 25%.
• Failure-to-pay penalty: 0.5% of unpaid taxes per month, also capped at 25%.
• Failure-to-deposit penalties: If your payroll tax deposits were late or insufficient, these can range from 2% to 15% depending on how late the payment is.
• Interest charges: Interest accrues on both the unpaid taxes and penalties until the balance is paid in full.

What’s the difference between Form 941 and Form 940?

The main difference lies in what they report and how often you file them:

• Form 941 is filed four times a year (quarterly). It reports federal income tax withheld from employee wages, plus both the employer and employee portions of Social Security and Medicare taxes.
• Form 940 is filed once a year. It reports your business’s liability for the Federal Unemployment Tax Act (FUTA), which funds unemployment benefits. FUTA is paid only by employers, not employees.

Do I still need to file Form 941 if I had no payroll in Q4 2025?

Yes. Even if you had no payroll, you must file a zero return for Form 941 unless the IRS has notified you that you’re not required to file.

‍