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Key 941 Changes

As we round out the second quarter, which has been an interesting quarter to say the least, you or your payroll provider will be looking at a new quarterly Form 941 to report your federal payroll taxes to the IRS. There are 18 added lines + an additional worksheet in order to handle all of the changes. Below are the key highlights as noted in the revised 941 instructions:

  • Payroll Tax Deferral – If you deferred payroll taxes as permitted by the CARES Act
    • Employers, including government employers, can defer the deposit and payment of the employer share of social security tax otherwise due on or after March 27, 2020, and before January 1, 2021, as well as deposits and payments due after January 1, 2021, that are required for wages paid during the quarter ending on December 31, 2020.
    • 50% of the deferred tax will be due by December 31, 2021 & the remaining amount will be due by December 31, 2022.
    • Note that if you have already made tax deposits including the social security portion, you won’t receive a refund or credit of any amount of the employer share of social security tax already deposited or paid for the quarter.
  • Credit for Qualified Sick & Family Leave Wages – If you paid sick or family leave wages to employees in the quarter as required under the Families First Coronavirus Response Act (FFCRA)
    • The new credit for qualified sick and family leave wages is reported on line 11b and, if applicable, line 13c.
    • The employee share of social security tax on qualified sick and family leave wages is reported on lines 5a(i) and 5a(ii). Note that qualified sick and family leave wages aren’t subject to the employer share of social security tax.
    • Qualified health plan expenses allocable to qualified sick and family leave wages are reported on lines 19 and 20.
    • See the instructions for line 11b for information about the new credit for qualified sick and family leave wages (calculated on new Worksheet 1)
  • Employee Retention Credit – If you retained employees/paid employees despite operations being fully or partially suspended due to a government order or during a quarter in which you have had a significant decline in gross receipts
    • The new employee retention credit is reported on line 11c and, if applicable, line 13d (calculated on new Worksheet 1). See the instructions for line 11c for information about the new employee retention credit.
    • Qualified wages (excluding qualified health plan expenses) for the employee retention credit are reported on line 21 (these amounts should also be included as wages on lines 5a and 5c, and, if applicable, line 5d).
    • Qualified health plan expenses allocable to the qualified wages for the employee retention credit are reported on line 22.
    • For the second quarter Form 941 only, qualified wages (excluding qualified health plan expenses) for the employee retention credit and qualified health plan expenses allocable to the qualified wages for the period from March 13, 2020, to March 31, 2020, are reported on lines 24 and 25, respectively.
  • Advance of Credits – If you requested an advance in your expected credits
    • Employers that requested an advance of the sick and family leave credit and/or the employee retention credit would have filed a Form 7200, Advance Payment of Employer Credits Due to COVID-19, for the quarter.
    • The amount of all advances received from Forms 7200 filed for the quarter is reported on line 13f. See the instructions for line 13f for more information.

For detailed instructions, find the revised form 941 instructions here: https://www.irs.gov/pub/irs-pdf/i941.pdf

Find the revised form 941 here: https://www.irs.gov/pub/irs-pdf/f941.pdf

Samantha Musser, CPA Outsourced Accounting Manager smusser@stephanoslack.com

June 30, 2020