Tax Relief for Employers: COVID-19 Brings Changes to Employer’s Quarterly Form 941
Disclaimer: This information was correct at the time of publication; however, new guidance from government agencies may be issued at any time, causing some or all of this information to change. Please visit our COVID-19 Business Strategy Hub for the latest news and ensure you are subscribed here to receive email alerts as they are released. We are working diligently to provide the most current information as it becomes available under our COVID-19 Actionable Insights For Businesses Series.
When the Families First Coronavirus Response Act (FFCRA) was issued in response to the COVID-19 pandemic, it introduced new wage benefits for employees. These benefits, in turn, created new tax credits and tax relief for employers. Due to these changes, Form 941, the Employer’s Quarterly Tax Form used to report employment taxes, was updated and is being implemented in the second quarter of 2020.
Does your company have wage payments that will qualify for updated reporting? Let’s take a look.
- Are you a company with fewer than 500 employees who paid qualified sick and family leave under the Emergency Paid Sick Leave Act (EPSLA)? If so, these wages are to be reported separately. These wages are only subject to the 6.2% employee portion of social security taxes, and the 6.2% employer portion is waived. Eligible employers may also be entitled to a tax credit for qualified wages, qualified health plan expenses and the employer share of Medicare tax on those wages.
- Are you a company with a significant decline in gross receipts who paid qualified wages and qualified health plan expenses allocable to qualified wages to retain your current employee roster? If so, there is a retention credit on 50% of these wages and health plan expenses, provided you did not receive a Paycheck Protection Program (PPP) loan or receive a tax credit for wages paid under the EPSLA mentioned above. The retention credit includes a lookback period of March 13, 2020, through March 31, 2020. These lookback wages are to be reported on the second quarter Form 941, rather than on an amended first quarter form.
Additionally, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employers are allowed to defer payment of their employer social security tax deposits due on or after March 27, 2020, and ending December 31, 2020. One-half of the deferral is due by December 31, 2021, and the remainder is due by December 31, 2022. This deferral is calculated and tracked on the updated Form 941. Worksheet 1 in the 941 instructions takes you through each step of calculating these figures.
For further guidance on what constitutes qualified wages, please visit the COVID-19 and the American Workplace page on the U.S. Department of Labor website.
The Form 941 Draft can be found here, and instructions for Form 941 can be found here on the Internal Revenue Service website.
It is essential your company understands the changes to the quarterly Form 941. If you need assistance in completing the form or additional services tied to COVID-19, Moore Colson is available to help. To learn more, visit the COVID-19 Business Services section of our website or contact us.
We are committed to keeping you updated on how to navigate financial challenges associated with the COVID-19 pandemic. You can subscribe here to get our news and alerts as they are released.
Heidi Harris is a Manager in Moore Colson’s Corporate Accounting Practice. Heidi provides over 20 years of operational and accounting experience in the hospitality industry and works with clients who need assistance with their month-end close activities, account reconciliations, and financial reporting.
Michelle Brooks is a Manager in Moore Colson’s Corporate Accounting Practice. Michelle is responsible for managing numerous corporate accounting processes and implementing QuickBooks™ accounting software for firm clients.
