For many large or small businesses running payroll and preparing the quarterly Form 941’s (Employer’s Quarterly Federal Tax Return) are not issues as the payroll programs that are used (Quickbooks, ADP, Paychex, etc.) automatically make the calculations that properly flow to the 941 forms onto the required line items.
The new changes to Form 941 are for employers to have a new way of reporting the new employment tax credits and other tax reliefs that are directly related to COVID-19 and provided for under the Coronavirus Aid, Relief and Economic Security (CARES) Act and Family First Coronavirus Response Act (FFCRA).
The three main items the revision to Form 941 provides are:
Credits for Qualified Sick and Family Leave Wages
The new line items under section 5a on the 941 are to report qualified sick leave wages or qualified family leave wages which provide employer credits. For example, an employee was unable to work because they were self-quarantining. Under the FFCRA guidelines, they are allowed qualified family leave wages because of exposure to COVID-19. The paid leave must be noted on its respective line to receive credits.
Employee Retention Credit
It is worth noting that this credit is only applicable to employers who did not receive a Small Business Interruption Loan under the Paycheck Protection Program (PPP) that is authorized under the CARES Act. Read more about if you are eligible for Employee Retention Credit in our article here.
Deferred Amount of the Employer Share of Social Security Tax
This is a deferral of the deposit and payment of the employer’s share after March 27, 2020 and before January 1. It is not a deferral of liability.
Keeping track of all qualified wages and taxes paid out during each quarter will be the simplest way to fill out your quarterly 941’s and keeping track is crucial for any audit that may occur. It is recommended to retain your records for a minimum of 3 years.
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Helpful information:
- https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
- https://www.irs.gov/coronavirus/new-employer-tax-credits
- https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
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