Form 941 Frequently Asked Questions

The IRS has released several new versions of Form 941 since quarter two of 2020. These changes to wage reporting are a result of COVID-19 relief provisions, including Qualified Sick and Family Leave, the Employee Retention Credit, deferred Social Security tax and, most recently, the COBRA Premium Assistance Credit.

It’s vital that employers make sure they are using the correct version of the form for both the 941 and the 941-x form.

What is Form 941?

IRS Form 941, the Employer’s Quarterly Federal Tax Return, is an IRS form used by employers to report federal income taxes, Social Security tax or Medicare tax withholding from employees’ paychecks. These forms are used to match employers’ W3 at year end to make sure that they have reported both taxable wages and withholdings correctly.

How Will the New 941 Form Changes Affect Me?

If your organization has utilized any of the COVID relief provisions (Qualified Sick and Family Leave, Employee Retention Credit, a deferral of Social Security tax or the COBRA Premium Assistance Credit) the changes to the form will greatly impact your wage reporting.

Making sure your payroll software is updated with the latest version should ensure that the qualified wages flow into the correct location on the forms for both the 941 and the W2.

To make sure you are ready to begin, you need to know the time-period to report for the different credits available:

How Many 941 Versions Have There Been Since 2020?

• Quarter 1 2020: Rev. January 2020
• Quarter 2 2020: Rev. April 2020
• Quarter 3 and 4 2020: Rev. July 2020
• Quarter 1 2021: Rev. March 2021
• Quarter 2 and 3 2021: Rev. July 2021

How Do I Complete the 941 Worksheets (Located in the 941 Instructions)?

With the changes to Form 941, employers should pay special attention to the 941 instructions, as you must now fill out worksheets for credit reporting.

• Worksheet 1 (Rev. June 2020): Credit for Qualified Sick and Family Leave Wages and the Employee Retention Credit; Credit for Qualified Sick and Family Leave Wages for leave taken before April 1, 2021
• Worksheet 2 (Rev. June 2021): Employee Retention Credit for the second quarter of 2021 only (wages paid after March 31, 2021 and before July 1, 2021)
• Worksheet 3 (Rev. June 2021): Credit for Qualified Sick and Family Leave Wages for leave taken after March 31, 2021
• Worksheet 4 (Rev. June 2021): Employee Retention Credit for the third and fourth quarters of 2021 only (qualified wages paid after June 30, 2021)
• Worksheet 5 (Rev. June 2021): COBRA Premium Assistance Credit

The purpose of the worksheets is to determine the credit your organization could receive based on qualifying for the COVID-19 relief credits. The worksheet will determine your full credit and how you report on the 941 form in either non-refundable credit or refundable credit. The two credits will be added together so that the employer receives the full credit.

Don’t forget that if you must amend any of your 941 returns, you must also have the correct 941-x Rev.

Where Do You File Form 941?

You are encouraged to sign up to file your Form 941 electronically. If you are filing a paper return, the location you send it to depends on if you are making a payment with the return or not. You will find the mailing addresses in the Form 941 instructions. It is based on the state in which your organization is located.

The Importance of Understanding Form 941

The goal of the 941 return is to make sure that the amounts you show for liabilities ties out to your deposits, deferral and credits. This is especially complicated given that relief provisions have now affected payroll records and reporting.

Confused about your payroll or how to properly report items related to COVID-19 relief provisions?

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