August 4, 2020

Volume X, Number 217

August 03, 2020

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IRS Issues Update to Form 941 for COVID-19 Related Employment Tax Credits and Other Tax Relief

On April 30, 2020, the Internal Revenue Service (IRS) released a draft of Form 941, Employer’s QUARTERLY Federal Tax Return, and accompanying instructions. The revised Form 941 includes various additional entries to report and reconcile payroll tax credits and deferral opportunities available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Families First Coronavirus Response Act (FFCRA). The form is expected to be available for use by employers beginning with the second quarter of 2020.

As anticipated, the draft version of Form 941 requires an employer to report any employment taxes retained by the employer in anticipation of refundable tax credits or the deferral opportunity, as well as to report any advances received from filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, for the quarter.

The new fields in part one of the draft Form 941 require employers to provide information pertaining to:

  • qualified sick leave wages (line 5a(i));

  • qualified family leave wages (line 5a(ii));

  • the nonrefundable portion of tax credits as calculated in Worksheet 1 (lines 11b and 11c);

  • the deferred amount of the employer share of social security tax (line 13b);

  • the refundable portion of tax credits as calculated in Worksheet 1 (lines 13c and line 13d); and

  • advances received from filing Form 7200 for the quarter (line 13f).

Further, the new entries in part three of the draft Form 941 require employers to provide information in connection with:

  • qualified health plan expenses allocable to qualified leave wages under the FFCRA (lines 19 and line 20);

  • qualified wages for the employee retention credit under the CARES Act (line 21);

  • qualified health plan expenses allocable to qualified employee retention credit wages (line 22);

  • credit received from filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, for the quarter (line 23); and

  • qualified wages for the employee retention credit and allocable health plan expenses paid during the first quarter from March 13 through March 31, 2020, to be used only on the second quarter filing of Form 941 (lines 24 and 25).

In addition, the IRS has indicated that an employer reporting tax credits under the CARES Act and/or FFCRA will be required to complete Worksheet 1, Credit for Sick and Family Leave Wages and the Employee Retention Credit. The three-step worksheet enables employers to quantify the refundable and nonrefundable components of the credits, including many sub-steps that guide an employer through the complex calculations.

The IRS is expected to release the final version of the Form 941 before the end of the second quarter (i.e., June 30, 2020), with second quarter Forms 941 being due by July 31, 2020.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume X, Number 130

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About this Author

Michael K. Mahoney, Ogletree Deakins, employee benefits attorney
Associate

Mr. Mahoney is a member of the Employee Benefits and Executive Compensation group. He focuses on employment tax matters at both the federal and state levels, the review of labor and tax laws governing qualified plans, and the strategic design of executive compensation plans for a global workforce.

Mike advises employers on a multitude of fringe benefit issues including tax advantageous means of structuring such benefits. He routinely assists clients resolve payroll audits, working with federal and state authorities to reduce assessments on behalf of employers. In...

973-656-1600
Randle Pollard Employee Benefits Lawyer Ogletree
Of Counsel

Randle Pollard is a member of the Employee Benefits and Executive Compensation group. He focuses on employment tax matters at both the federal and state levels, the review of labor and tax laws governing qualified benefit plans, and advises client on the taxation of employee fringe benefits.

Randle has over twenty years of tax law experience as in-house counsel, and from prior positions within government, public accounting, and academia. In addition to his practice with Ogletree Deakins, he is a member of the law faculty at American University, Washington College of Law, as an Adjunct Professor of Law.

Randle has been a panelist and presenter at several conferences and meetings including those associated with the American Bar Association Section of Taxation, the National Bar Association, and the Academy of Legal Studies in Business.  He has several publications and his scholarship focuses on municipal bonds, state and local tax policy and state and local tax incentives.

202-887-0855
Shivam Bimal Employee Benefits Lawyer Ogletree
Associate

Shiv assists clients with employee benefits and executive compensation matters.  He advises clients on a variety of issues related to qualified and nonqualified plans, including plan design, implementation and ongoing administration, correction procedures, Code Section 409A issues, and IRS filing requirements.

Shiv frequently advises clients on taxability of various fringe benefits, employment tax withholding and reporting obligations, worker misclassification issues, and issues related to business travelers.  He also has experience with employment tax and executive compensation...

212-492-2500