The coronavirus outbreak of 2020 has changed the ways people interact, work and do business with each other. One change of particular interest to the payroll industry has been the revisions to the Internal Revenue Service’s Form 941.
Approved and released by the agency on June 19th, the revised form includes multiple lines for reporting tax information related to the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES) payroll tax relief legislation approved earlier in 2020. There are a total of 18 new lines on Form 941.
As beneficial as the relief legislation has no doubt been to workers and businesses, the new form presents payroll tax professionals with new compliance challenges … and the same penalties for errors.
"The new form presents payroll tax professionals with new compliance challenges … and the same penalties for errors."
The new and revised lines are found in parts 1 and 3 of the form. Let’s walk through them.
FORM 941: PART 1
The bulk of the changes are in Part 1 of Form 941, with 11 new lines – and additional revisions to existing lines.
Line 5a(i): Qualified Sick Leave Wages and Line 5a(ii): Qualified Family Leave Wages. Employers are required to provide these, when applicable, under the FFCRA.
Line 11b: Nonrefundable Portion of Credit for Qualified Sick and Family Leave Wages and Line 11c: Nonrefundable Portion of Employee Retention Credit. For these lines, employers use a worksheet to calculate the combined credit amount for qualified sick and family leave and enter it on Line 11b; for Line 11c they use Worksheet 1 to calculate the amount of employee retention credit they’re eligible for and figure out what portion of that credit is nonrefundable.
Line 11d: Total Nonrefundable Credits. Employers enter the totals from lines 11a, 11b and 11c.
Line 13b: Deferred Amount of the Employer Share of Social Security Tax. Employers use this line to enter the amount of their share of Social Security tax they chose to defer instead of depositing for the normal deadlines in the reported quarter is entered here. Remember: Deferred amounts are due in equal shares in 2021 and 2022.
Line 13c: Refundable Portion of Credit for Qualified Sick and Family Leave Wages and Line 13d: Refundable Portion of Employee Retention Credit from Worksheet 1. For these lines, the employer uses a worksheet to determine how much of their combined credit for qualified sick and family leave wages is nonrefundable, entering the amount of the refundable portion of the combined credit on this line.
Line 13e: Total Deposits, Deferrals and Refundable Credits. The employer enters the total amounts from lines 13a, b, c and d on this line.
Line 13f: Total Advances Received from Filing Form(s) 7200. Employers use this line to report the total amount of credit advances they received from filing out copies of Form 7200 during the quarter.
Line 13g: Total Deposits, Deferrals and Refundable Credits Less Advanced. Employers subtract line 13f from Line 13e and enter the result on this line.
Several modifications were also made to existing lines in Form 941 as well. They include revised instructions for Line 5a, Line 11 being renumbered as Line 11a and Line 12 being renamed.
FORM 941: PART 2
No new revisions.
FORM 941: PART 3
Seven new lines were added to Part 3.
Lines 19 and 20: Employers report the amount of qualified health plan expenses for group health plan coverage for sick and family leave wages on these lines.
Line 21: The total qualified wages factored into calculating the amount of employee retention credit the employer is eligible for is entered here.
Line 22: Employers report the amount of qualified health plan expenses for employees paid qualified wages on this line.
Line 23: Credits from Form 5884-C are entered here.
Line 24 and 25: Allocable health care plan expenses and qualified wages paid between March 13 and Dec. 31, 2020 can take advantage of the employee retention credit … but the first quarter ended on March 31. The 941 wasn’t finalized then, so employers use this line to report qualified wages earned during this period in March.
Compliance Doesn’t Have to be a Challenge
Despite these complex changes, payroll professionals are still expected to be fully compliant and accurate when filing. For a payroll department already overwhelmed with staffing issues, remote workforce and other challenges, an increased compliance load may be the thing that takes a payroll professional’s beyond general weariness. Who wants that?!? AT PTM, we have solutions.
PTM isn’t just about software – our staff stays aware of the latest developments from over 11,000 federal, state and local tax agencies found across the United States. We will help you and your business stay compliant and successful through each quarter and beyond.
For more information, click the link below.