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IRS Finalizes Updates to Form 941 for COVID-19 Tax Credits


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IRS Finalizes Updates to Form 941 for COVID-19 Tax CreditsThe IRS has worked diligently to modify the Form 941 to accommodate the changing laws around the COVID-19 pandemic. As of July 1, 2020, the IRS finalized the 941 Quarter 2 form. The form and instructions were posted just in time for employers’ federal tax returns for quarter 2 filings (which have a due date of July 31). For those that file or print through your software system, please be sure to contact your provider to make sure that the system can accommodate these updates.

You can download the updated form here, along with the instructions here.

The Form 941 updates cover the legislation passed due to COVID-19: The Families First Coronavirus Response Act (FFCRA) and the CARES Act. Modifications were made to accommodate the following tax credits:

  • Qualified leave wages
  • Employee retention credit
  • Advance payment of credits
  • Deferred payment of employer tax

The 19-pages of instructions provide examples on how to fill out the form and a worksheet to help with calculations. Page 1 of the instructions highlights “What’s New” on the form.

The 18 additional lines on Form 941 are covered on the following pages of the instructions:

5.a.i – Qualified Sick Leave Wages (page 9 of the instructions)

5.a.ii – Qualified Family Leave Wages (page 9)

11b – Nonrefundable portion of credit for qualified sick and family leave wages from Worksheet 1 (found in the instructions) (page 11)

11c – Nonrefundable portion of employee retention credit from Worksheet 1 (page 12)

11d – Total Nonrefundable Credits (page 12)

13b – Deferred amount of the employer share of social security tax (page 12)

13c – Refundable portion of credit for qualified sick and family leave wages from Worksheet 1 (page 15)

13d – Refundable portion of employee retention credit from Worksheet 1 (page 15)

13e – Total deposits, deferrals and refundable credits (page 15)

13f – Total advances received from filing Form(s) 7200 for the quarter (page 15)

13g – Total deposits, deferrals, and refundable credits less advances (page 15)

19 – Qualified health plan expenses allocable to qualified sick leave wages (page 18)

20 – Qualified health plan expenses allocable to qualified family leave wages (page 18)

21 – Qualified wages for the employee retention credit (page 18)

22 – Qualified health plan expenses allocable to wages reported on line 21 (page 18)

23 – Credit from Form 5884-C, line 11, for this quarter (page 18)

24 – Qualified wages paid March 13 through March 31, 2020, for the employee retention credit (use this line only for the second quarter filing of Form 941) (page 18)

25 – Qualified health plan expenses allocable to wages reported on line 24 (use this line only for the second quarter filing of Form 941) (page 18)

In addition to the newly added lines, various text and procedural modifications were made to the form. You can find that information in the 941 instructions as well.

COVID-19 Resources for Payroll

Our COVID-19 Response Task Force at Integrity Data has been keeping a close eye on the latest developments and legislation affecting your payroll and HR departments. For Microsoft Dynamics GP payroll users: we've put together some best practices to help you handle these changes, see the blogs below.

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Written by Integrity Data

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