The IRS has updated the Form 941 many times over the past year. It’s no surprise that there are going to be more changes on the way for the second quarter of 2021. The IRS released a draft for Form 941 on May 25, 2021 and while these changes are not set in stone, they provide great insight into what employers can expect for the upcoming quarter.
Here is a guide to the 941 changes we can expect and why these changes have been made.
What is Form 941?
The Form 941 is the Employer’s Quarterly Federal Tax Return. This form is filed by employers that pay employees wages that are subject to income tax, social security tax, and Medicare taxes.
When is the Form 941 due to the IRS?
This Form should be filed each quarter with the IRS, see the table below for the deadlines for the rest of 2021. Employer e-file Form 941 to get instant notifications from the IRS.
August 2, 2021
November 1, 2021
January 31, 2021
Why are changes in Form 941 for the Second Quarter of 2021 expected?
The introduction of the American Rescue Plan in March of 2021 has prompted a lot of the expected changes to the Form 941. This is because of the amendments and expansions of the existing COVID-19 tax credits.
Under the American Rescue Plan, the credits available for qualified sick and family wages are no longer required. Employers are not required to offer 80 hours of paid sick leave or family leave due to COVID-19. However, if they do offer these credits, they can now include sick leave due to getting the vaccine and recovering from the vaccine.
The employee retention credit has also been extended. However, it is important to note that the sick and family leave wages will be calculated differently before and after April 1, 2021. There is also a new tax credit available under the American Rescue Plan, this is the COBRA premium assistance credit.
For some background information, COBRA is a program that allows individuals to stay on their employee-sponsored health insurance plan, even if they are involuntarily terminated or find their hours reduced below full-time. This is a helpful option, but it is very expensive.
The individual using COBRA is responsible for their entire premium and administration costs. This tax credit allows employees that are experiencing involuntary termination or reduced hours due to the pandemic. Employers will cover the premium for these employees and then claim the COBRA premium assistance credit to offset the cost.
Which lines have been affected in Form 941 for 2nd Quarter?
The following lines have been either edited, added or moved further down the Form 941, according to the IRS draft.
Line 5a: Taxable social security wages*
Line 5a(i): Qualified sick leave wages*
Line 5a(ii) Qualified family leave wages*
For the second quarter, the values on lines 5a(i) and 5a(ii) should reflect only the qualified wages paid after March 31, 2021 for leave taken before April 1, 2021. The value entered on Line 5a should reflect the qualified wages for leave taken after March 31, 2021
Line 11b- Nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021
Line 11d- Nonrefundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021
Line 11e- Nonrefundable portion of COBRA premium assistance credit (see instructions for applicable quarters
Line 11f- Number of individuals provided COBRA premium assistance
Line 11g- Total nonrefundable credits. Add lines 11a, 11b, 11c, 11d, and 11e
Line 13c- Refundable portion of credit for qualified sick and family leave wages for leave taken
Line 11e- Refundable Portion of Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2021
Line 13f- Refundable portion of COBRA premium assistance credit (see instructions for applicable quarters)
Line 13g- Total deposits and refundable credits. Add lines 13a, 13c, 13d, 13e, and 13f
Line 13h- Total advances received from filing Form(s) 7200 for the quarter
Line 13i- Total deposits and refundable credits less advances. Subtract line 13h from line 13g
Line 14- Balance due. If line 12 is more than line 13i, enter the difference and see instructions .
Line 15- Overpayment. If line 13i is more than line 12, enter the difference
Line 19- Qualified health plan expenses allocable to qualified sick leave wages for leave taken before April 1, 2021
Line 20- Qualified health plan expenses allocable to qualified family leave wages for leave taken before April 1, 2021
Line 23- Qualified sick leave wages for leave taken after March 31, 2021
Line 24- Qualified health plan expenses allocable to qualified sick leave wages reported on line 23
Line 25- Amounts under certain collectively bargained agreements allocable to qualified sick leave wages reported on line 23
Line 26- Qualified family leave wages for leave taken after March 31, 2021
Line 27- Qualified health plan expenses allocable to qualified family leave wages reported on line 26
Line 28- Amounts under certain collectively bargained agreements allocable to qualified family leave wages reported on line 26 .
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