Draft Form 941 for 2026 Released: Important Changes to Know

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Attention Employers! The IRS has released a draft of Form 941 for 2026. While it closely resembles the Q1 2025 version, there are some important updates that employers and payroll providers should be aware of.

This draft gives you an early preview of what to expect in the 2026 Form 941. Let’s break it down!

Key Changes in Draft Form 941 for 2026

The following are the key updates included in the newly released draft Form 941 for 2026:

1. Updated Social Security Tax Rates and Wage Threshold

• Increase in Social Security Wage Base Limit: For 2026, the Social Security wage base limit has increased to $184,500. Wages above this threshold are not subject to Social Security tax withholding.
  
• Adjusted Threshold for Household Workers: Social Security and Medicare taxes will apply to cash wages of $3,000 or more paid to household workers in 2026.
  
• Adjusted Threshold for Election Workers: Election workers earning $2,500 or more in cash or equivalent compensation in 2026 will be subject to Social Security and Medicare taxes. 

2. Classification for Aggregate Filers

The draft Form 941 introduces a new checkbox section specifically for aggregate filers. This applies to aggregate filers who file Form 941 on behalf of multiple employers, allowing them to clearly indicate their aggregate filing status.

This section applies to:

• Section 3504 Agents
• Certified Professional Employer Organizations (CPEOs)
• Other third-party filers

3. Direct Deposit Refund Option Added to Form 941 Line 15

The IRS now allows employers to receive refunds of overpayments via direct deposit. To support this, Line 15 on the 2026 Form 941 has been expanded to include five separate fields (Line 15a–15e) where employers can enter their bank account information to receive refunds.

• Line 15a – Overpayment:
  This field shows the total amount overpaid for the quarter.
  
• Line 15b – Choose your option:
  Select how to handle the overpayment. You can choose to:
  • Apply it to your next return, or
  • Request a refund
    
• Line 15(c) – Routing number:
  If you’re requesting a refund, you can now enter your bank’s routing number to receive the amount by direct deposit.
  
• Line 15(d) – Type of account:  
  Indicate whether the type of bank account is checking or savings.
  
• Line 15(e) – Account number:
  Enter the actual account number where the refund should be deposited.

In previous Form 941, overpayments were often issued by check, which could delay the refund process. With the updated Form 941 for 2026, employers can now opt for direct deposit refunds, making the process faster and more secure.

4. Electronic Form 941 Return Transcripts

For tax years 2023 and later, Form 941 return transcripts are now available electronically via your IRS Business Tax Account. Employers can use this feature to verify filings and reconcile payroll reporting efficiently.

5. Withholding on Qualified Tips and Overtime Compensation

Under P.L. 119-21 (One Big Beautiful Bill Act), the IRS provides updated rules for withholding and reporting on qualified tips and overtime compensation

• Qualified Tips: Employees can deduct up to $25,000 of cash tips for 2025–2028. Employers must withhold federal income tax using updated W-4s, while Social Security and Medicare taxes still apply.
  
• Qualified Overtime: Employees may deduct up to $12,500 ($25,000 if married filing jointly) of overtime pay above their regular rate. Social Security and Medicare taxes still apply.
  
• Reporting: Employers must report tips and overtime on W-2s or 1099s and provide statements to recipients. Transition relief is available for 2025 reporting.

A Quick Summary of the Changes in 941 Form 2026

What Should Employers Do Now?

While the draft isn’t final, it’s a smart move to start preparing early:

• Review your filing status: If you act as a third-party filer, determine whether you qualify as a Section 3504 Agent, CPEO, or another type. You’ll likely need to indicate this on future returns.
  
• Plan for refund handling: If you expect overpayments, consider how you’ll provide banking details for faster refunds via direct deposit, especially if you manage multiple returns.
  
• Watch for finalized changes: Stay tuned for the official release so you can make any necessary updates to your payroll processes or filing systems.

The Bottom Line

The 2026 draft of Form 941 introduces a couple of useful updates, like identifying filer types and adding bank info fields for direct deposit refunds. While these changes aren’t dramatic, they’re definitely worth noting.

That said, keep in mind this is just a draft. Nothing is final yet, and the IRS may still make adjustments before releasing the official form. We’ll continue to monitor updates and keep you informed as soon as any new changes are confirmed.

Easy, Secure, and Accurate Form 941 filing—Guaranteed!

Article Sources:

• Internal Revenue Service. “About Form 941, Employer’s Quarterly Federal Tax Return“.
• Internal Revenue Service. “Form 941: Employer’s Quarterly Federal Tax Return“.
• Internal Revenue Service. “Instructions for Form 941“.