Payroll Briefs

What to Know About the Updated Form 941

May 20, 2020

At the end of April, the Internal Revenue Service (IRS) issued new drafts of the 2020 Form 941 Employer’s Quarterly Federal Tax Return, to be used with the second quarter return. The new form must be filed by July 31, 2020, which if you’re a DM Payroll Solutions’ client you won’t need to worry – we will file on your behalf. The form has significant changes to facilitate the proper recording of the following as a result of the COVID-19 pandemic:

  • Credit for qualifying sick and family leave wages
  • Employee retention credits
  • Deferrals of the employer’s portion of Social Security tax

Each of these are relief measures from the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which have both provided great payroll tax relief. Form 941’s Schedule R (Allocation Schedule for Aggregate Form 941 Filers) has also been updated to accommodate data reporting for payroll-related measures.

Credit for Qualifying Sick and Family Leave Wages

While the refundable credit to provide qualified sick leave wages and credit for providing family leave wages are separate, they both are in effect pertaining to wages paid April 1, 2020 through December 31, 2020.

Employee Retention Credits

Employee retention credits are refundable tax credits totaling 50% of qualified wages paid out to employees from March 13, 2020 to December 31, 2020. Employers who paid qualified wages within the timeframe of March 13 to March 31, 2020 can include 50% of those wages with 50% of qualified wages during the second quarter of 2020 on their Form 941 in order to claim their employee retention credit. It’s important to note the credit should not be included on Form 941 from the first quarter.

Deferrals of the Employer’s Portion of Social Security Tax

When it comes to line item 13b, the deferred amount of the employer share of Social Security tax, it’s interesting to note the instructions imply the deferral is not required, but voluntary. As the employer’s share is a deferral of payments and deposits, and not a deferral of liability, they should not expect to receive a credit or refund deposited for the quarter. Deferrals of the employer’s share of Social Security tax are available for the window of March 27, 2020 to December 31, 2020.

DM Payroll Solutions’ payroll tax advisors understand these new Form 941 requirements and will continue to file this return as part of its tax filing services. For assistance, contact us today.