New 940 tax form

The New 941 Tax Form is here!

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New 940 tax form

The IRS published a revised Form 941 for use throughout the rest of 2020. The new 941 form includes the changes made by the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act. These added various types of payroll tax relief.

Specifically, the new IRS 941 form adds lines to account for:
  • Credit for Qualified Sick and Family Leave Wages
  • Employee Retention Credit; and
  • Deferred Amount of the Employer Share of Social Security Tax.

New Lines:

The 11 new lines in Part 1 of the revised Form 941 are as follows:

  • Line 5a(i). Qualified Sick Leave Wages
    • Use this line to report the qualified sick leave wages an employer paid to employees during the reported quarter under the Families First Coronavirus Response Act (FFCRA).
  • Line 5a(ii). Qualified Family Leave Wages:
    • This line is used for reporting the applicable amount of qualified family leave wages that an employer paid to its employees during the reported quarter because the employer was required to provide these payments under the FFCRA.
  • Line 11b. Nonrefundable Portion of Credit for Qualified Sick and Family Leave Wages From Worksheet 1:
    • An employer would use the new Worksheet 1 within the instructions for the revised Form 941 to calculate the amount of the combined credit for qualified sick leave wages and qualified family leave wages for which it is eligible with respect to the reported quarter. The employer uses the worksheet to determine the nonrefundable portion, reported in Line 11b of Form 941 from Line 2j.
  • Line 11c. Nonrefundable Portion of Employee Retention Credit From Worksheet 1:
    • An employer would use Worksheet 1 to calculate the amount of the employee retention credit for which it is eligible with respect to the reported quarter. The employer would further use the worksheet to determine the portion of the credit that is nonrefundable, and this amount, identified in Line 3j of the worksheet, would be reported in Line 11c of Form 941.
  • Line 11d. Total Nonrefundable Credits:
    • The amount entered into this line is the total of the amounts entered into Lines 11a, 11b, and 11c.
  • Line 13b. Deferred Amount of the Employer Share of Social Security Tax:
    • This line is used for reporting the amount of the employer share of Social Security tax that the employer chose to defer instead of depositing for the normal deposit deadlines in the reported quarter, with the deferred amounts due in 2021 and 2022.
  • Line 13c. Refundable Portion of Credit for Qualified Sick and Family Leave Wages From Worksheet 1
    • After the employer determines through using Worksheet 1 how much of its combined credit for qualified sick leave wages and qualified family leave wages is nonrefundable, the employer would subtract the amount of the nonrefundable portion from the total amount of the combined credit to determine the amount of the refundable portion. The refundable portion of the combined credit, identified in Line 2k of the worksheet, would be reported in Line 13c of Form 941.
  • Line 13d. Refundable Portion of Employee Retention Credit From Worksheet 1:
    • After the employer determines through using Worksheet 1 how much of its employee retention credit is nonrefundable, the employer would subtract the amount of the nonrefundable portion from the total amount of the credit to determine the amount of the refundable portion. Report the refundable portion of the credit, identified in Line 3k of the worksheet, on Line 13d of Form 941.
  • Line 13e. Total Deposits, Deferrals, and Refundable Credits:
    • The amount reported for this line is the sum of the amounts reported in Lines 13a, 13b, 13c, and 13d.
  • Line 13f. Total Advances Received From Filing Form(s) 7200 for the Quarter:
    • Report the total of the credit advances the employer received by filing each Form 7200 for the quarter. The employer can file each form only when its anticipated total of the three new refundable employment tax credits exceeds its accumulated employment tax liability for the quarter.
  • Line 13g. Total Deposits, Deferrals, and Refundable Credits Less Advances:
    • The amount reportable on this line is the result of subtracting Line 13f from Line 13e.

No new lines were added to Part 2 of Form 941.

The seven new lines in Part 3 of the revised Form 941 are as follows:
  • Line 19. Qualified Health Plan Expenses Allocable to Qualified Sick Leave Wages:
    • Report the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified sick leave wages on this line. Enter this amount also on Worksheet 1’s Line 2b.
  • Line 20. Qualified Health Plan Expenses Allocable to Qualified Family Leave Wages:
    • Report the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees receiving qualified family leave wages on this line. Enter this amount also on Worksheet 1’s Line 2f.
  • Line 21. Qualified Wages for the Employee Retention Credit
    • Report the amount of qualified wages used to determine the employer’s eligibility for the employee retention credit on this line. Enter this amount also on Worksheet 1’s Line 3a.
  • Line 22. Qualified Health Plan Expenses Allocable to Wages Reported on Line 21:
    • Report the amount of qualified health plan expenses incurred for maintaining group health plan coverage for employees who received qualified wages used in calculating the employee retention credit on this line. Enter this amount also on Worksheet 1’s Line 3b.
  • Line 23. Credit From Form 5884-C, Line 11, for This Quarter:
    • The Section 3111(e) credit for employment of qualified veterans, which is reportable on Line 11 of Form 5884-C, also is now reportable on Line 23 of Form 941.
  • 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): As the employee retention credit is available for qualified wages paid from March 13 to Dec. 31, 2020. But the period from March 13 to 31 was in the first quarter. The revisions to Form 941 were not ready for that quarter. Employers report qualified wages paid from March 13 to 31 for the employee retention credit on the second-quarter Form 941.
    • Report qualified health plan expenses for employees with wages used in the employee retention credit calculation on Line 25.  Enter this amount on Worksheet 1’s Line 3d as well.

The IRS did not add new lines to Parts 4 and 5 of Form 941.

Modifications to Text or Procedures for Preexisting Lines

Part 1 is the main section of Form 941.  It includes adjustments to preexisting lines based on the finalized version and draft instructions. The modifications are as follows:

  • Line 1. Number of Employees:
    • The IRS removed the option to indicate the number of employees who received compensation in the first quarter during the pay period including March 12, as the revised 2020 Form 941 applies starting with the second quarter of 2020.
  • Line 5a. Taxable Social Security Wages:
    • The revised instructions specify that you report total qualified wages on Line 5a, excluding qualified sick leave and family leave wages, which you report on Lines 5a(i) and 5a(ii), respectively.
  • Line 5e. (Total of Amounts Reported in Line 5 series Column 2):
    • This total now also includes Column 2 amounts for the new Lines 5a(i) and 5a(ii).
      >The IRS renumbered the former Line 11 to Line 11a, which still reports the Qualified Small Business Payroll Tax Credit for Increasing Research Activities. If you enter an amount for this line, you must still attach Form 8974.
  • The IRS renamed Line 12 to “Total Taxes After Adjustments and Nonrefundable Credits”
    • to report the result of subtracting Line 11d from Line 10. Previously, this line was called “Total Taxes After Adjustments and Credits” and subtracted Line 11 from Line 10.
  • The IRS renumbered the former Line 13 as Line 13a,
    • which still reports the Total Deposits for This Quarter, including Overpayments Applied From a Prior Quarter and Overpayments Applied From Form 941-X, 941-X (PR), 944-X, or 944-X (SP) filed in the current quarter.An employer would not include in Line 13a the amount of employment taxes that the employer chose to retain instead of depositing because the amount retained was equal to or less than the total of the three new refundable employment tax credits for which the employer anticipated that it would be eligible. An employer should not include in Line 13a any deferred Social Security tax for 2021 and 2022.
  • Line 14. Balance Due and Line 15, Overpayment
    • now refer to Line 13g instead of Line 13.

You can now access the new form through 100 CON (version 22.3.84.0) in the 5-4-1 Federal & State Tax Filing menu. You may have to update your forms if you haven’t already done so. Simply go to Options>Update Forms.

Processing it through Sage 100 Contractor/Aatrix benefits:
  1. The system automatically fills in the form using your payroll data.
  2. You can review and edit the form onscreen.
  3. Click “eFile” to file your 941 directly to the IRS.

The new version of Form 941 is now three pages (currently, two pages). The new instructions include a worksheet (Worksheet 1) to help with the computations. You only need to complete certain steps of the worksheet. This depends on the type of qualified wages your company paid during the quarter. The IRS published 17 pages of instructions for the revised Form 941. These detailed instructions are available at https://www.irs.gov/pub/irs-pdf/i941.pdf. If you have questions, we recommend working with your Accountant or CPA.

by Shantal Myers , Sage Certified Consultant

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