COVID-19 Updates to Form 941

This article details updates to Form 941 that have been implemented to include data related to relief programs provided by the CARES and Families First Coronavirus Response (FFCR) Acts.

 

OVERVIEW

Form 941, Employer's Quarterly Federal Tax Return has been revised by the IRS to provide reporting on data related to relief programs provided by the CARES and Families First Coronavirus Response (FFCR) Acts. 

The updated form was released on June 19, 2020, and must be filed by employers beginning with the second quarter of 2020. Namely files Form 941 on your behalf. We have been following updates to the form from the IRS to ensure the form we produce and file for your company is compliant with the IRS requirements. 

This article details the new line items that have been added to the form and any modifications that have been made to existing lines to aid you in your review of your quarterly tax package. Updates were only made to Part 1 and Part 3 of the 941. Additional details and finalized instructions for the form are available on the IRS website.

STAY UP TO DATE:

Always stay up to date with COVID-19: Consolidated Appropriations Act Updates for 2021.

 

UPDATES TO PART 1

  • Line 5a (i) Qualified sick leave wages - This line is used to report qualified sick leave wages paid to employees during the quarter. The FFCR requires that these wages are reported on.

    • Calculation: This is the sum of quarterly wages paid using the Federal Paid Medical Leave - Tier 1 and Federal Paid Medical Leave - Tier 2 pay type codes.

 

  • Line 5a (ii) Qualified family leave wages - This line is used to report qualified family leave wages paid to employees during the quarter. The FFCR requires that these wages are reported on.

    • Calculation: This is the total quarterly wages paid using the Federal Paid Family Leave pay type code.

 

  • Line 11b Nonrefundable portion of credit for qualified sick and family leave wages from Worksheet 1 - This line is used to report on the combined credit for qualified sick and family leave wages that is non-refundable for the quarter.

    • Calculation: This figure is calculated using Worksheet 1. Credit for Qualified Sick and Family Leave Wages and the Employee Retention Credit in the IRS instructions on Form 941. The amount is noted on Line 2j in the worksheet and is reported on Line 11b of the 941.

 

  • Line 11c Nonrefundable portion of employee retention credit from Worksheet 1 - This line is used to report on the non-refundable portion of Employee Retention Credits used in the quarter.

    • Calculation: This figure is calculated using Worksheet 1. Credit for Qualified Sick and Family Leave Wages and the Employee Retention Credit in the IRS instructions on Form 941. The amount is noted on Line 3j in the worksheet and is reported on Line 11c of the 941.

 

  • Line 11d Total nonrefundable credits - This line reports on the total of all of your nonrefundable leave and retention credits.

    • Calculation: This is the sum of lines 11a, 11b and 11c.

 

  • Line 13b Deferred amount of the employer share of Social Security tax - This line reports on the employer portion of Social Security taxes deferred from the quarter that will be paid in 2021 and 2022.

    • Calculation: This figure can be found in your Payroll Register for the quarter in Namely Payroll. Go to Reports > Date Range > Apply the quarter as the date range. The amount will be noted as Employer Uncollected Taxes.

 

  • Line 13c Refundable portion of credit for qualified sick and family leave from Worksheet 1 - This line is used to report on the combined credit for qualified sick and family leave wages that is refundable for the quarter.

    • Calculation: Subtract the non-refundable portion of sick and family leave from Line 2j on the worksheet from the total combined credit. The refundable portion will be noted on Line 2k of the worksheet and is reported on Line 13c of the 941.

 

  • Line 13d Refundable portion of employee retention credit from Worksheet 1 - This line is used to report on the refundable portion of Employee Retention Credits used in the quarter.

    • Calculation: Subtract the non-refundable portion of Employee Retention Credits from Line 3j on the worksheet from the total credit. The refundable portion will be noted on Line 3k of the worksheet and is reported on Line 13d of the 941.

 

  • Line 13e Total deposits, deferrals, and refundable credits - This line is used to report on all deposits, deferrals and refundable credits for the quarter.

    • Calculation: This is the sum of the amounts reported on 13a, 13b, 13c and 13d.

 

  • Line 13f Total advances received from filing Form(s) 7200 for the quarter - This line is used to report on the total of credit advances that you received by filing Form(s) 7200 in the quarter. Form 7200 should be filed when you anticipate that the total amount of three refundable employment tax credits will exceed your employment tax liability for the quarter. 

    • Calculation: This is the total amount distributed via a COVID-19 Payroll Credit in Namely Payroll, plus any amounts refunded using Form 7200, as detailed in COVID-19: Tax Credits Automation Overview. ​​​

 

  • Line 13g Total deposits, deferrals and refundable credits less advances - This line reports total deposits, deferrals and refundable credits calculated on Line 13e and subtracts advances reported on Line 13f.

    • Calculation: Subtract Line 13f from Line 13e.

 

UPDATES TO PART 3

  • Line 19 Qualified health plan expenses allocable to qualified sick leave wages - This line reports on the qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified sick leave wages in the quarter. This figure is also noted on Line 2b on Worksheet 1. 

 

  • Line 20 Qualified health plan expenses allocable to qualified family leave wages - This line reports on the qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified family leave wages in the quarter. This figure is also noted on Line 2f on Worksheet 1. 

 

  • Line 21 Qualified wages for the employee Retention Credit - This line reports on qualified wages factored into determining the amount of employee retention credits you are eligible for. This figure is also noted on Line 3a on Worksheet 1.

 

  • Line 22 Qualified health plan expenses allocable to wages reported on Line 21 - This line reports on qualified health plan expenses incurred for maintaining group health plan coverage for employees paid qualified wages factored into calculating employee retention credits. This figure is also noted on Line 3b of Worksheet 1.

 

  • Line 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) - Because Form 941 was not revised in time for Q1 filing, you must report qualified wages paid from March 13-31 on your Q2 941, in addition to the Q2 total noted on Line 21.

    • Calculation: This is the sum of the amount paid during this time period using the pay type code Employee Retention Credit.

 

  • Line 25 Qualified health plan expenses allocable to wages reported on line 24 (use this line only for the second quarter filing of Form 941) - This line reports on the total qualified health plan expenses incurred for maintaining group health plan coverage for employees paid qualifying wages factored into the calculation of employee retention credits for Q1. This amount is also noted in Line 3d of Worksheet 1.