IRS Revises Form 941 for COVID-19

Recently the IRS released a draft of the new Form 941, the Employer’s Quarterly Federal Tax Return Form. The Form 941 is used by employers to report quarterly taxes withheld from the employee’s paycheck and to pay the employer’s portion of the taxes. As a result of the COVID-19, some changes have been made in the draft that we should expect to see in the final version.

The new Form 941 is being created to accommodate reporting of three new COVID-19 tax credits. The COVID-19 tax credits include the Paid Sick Leave Credit, the Family Leave Credit, and Employee Retention Credit. The COVID-19 tax credits are designed to provide relief to Americans in the form of paid leave for COVID-19 related time-off and to businesses through reimbursable credits for the paid sick time and employee retention. Businesses receive the credit reimbursement by reducing the amount of payroll taxes withheld by the appropriate COVID-19 tax credit amount and reporting.

The IRS has stated that the new 941 should be used starting with second quarter of 2020 to report retained taxes under the COVID-19 tax credits.

Included in the draft form are 23 new fields related to the COVID-19 tax credits. The new data fields include:

• Refundable and nonrefundable credit for qualified sick and family leave wages
• Refundable and nonrefundable employee retention credit
• The deferred amount of the employer share of social security tax
• Total quarter advances received from filing Form 7200, Advance Payment of Employer Credits Due to COVID-19

Employers can find more information on how to fill out the new lines on Form 941 within the updated Form 941 instructions.

While the Form 941 draft has not been implemented yet, the final version is expected to be released for employers to file for the second quarter of 2020. For the official Form 941, be sure to check the IRS website when you are ready to file your quarterly taxes.