There’s a new IRS Form 941 for Q2 2020. Here’s a primer to help you fill out your Quarterly Federal Tax Return. Includes PDF.
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2020 Form 941: Updated Q2 instructions and pdf download

Updated July 21, 2020

 

If you’re an employer that withholds more than $1,000 in Social Security, Medicare, and federal income taxes from your employees’ wages, you’ll need to fill out and submit Form 941, the Employer’s Quarterly Federal Tax Return. This form breaks down how much you’ve withheld from your staffers’ paychecks, as well as how much you’re sending in for the employer portion of Social Security and Medicare taxes.

 

Please note that a new version of Form 941 was issued by the IRS in April 2020. Beginning with the second quarter’s tax filing, employers will need to use the updated version, which includes some major changes. The revised Form includes updates to help employers 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).

 

Here’s a guide to how the revised 941 works, some instructions for completing yours, and a downloadable pdf if you need a copy of the new form.

 

What is Revised Form 941?

A 941 return is used to report payroll tax withholdings such as federal income tax plus Social Security and Medicare (typically called FICA) that are withheld from employees’ paychecks. Your Form 941 filing also reports your business’s quarterly contribution to Social Security and Medicare taxes. Keep in mind that the 941 reconciles the amounts deducted from employee paychecks and amounts due from employers but is separate from the semiweekly or monthly deposits you are making.

 

There have been significant changes made to Form 941 to allow for the reporting of new employment tax credits and other tax relief related to COVID-19.

 

The revised Form 941 includes lines to report:

 

  • Credit for qualified sick leave and expanded family and medical leave wages
  • Employee Retention Credit
  • Deferrals of the employer share of social security tax during the quarter
  • Credits received from filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, for the quarter

The revised instructions include a new Worksheet 1, which will be used to figure the credit for qualified sick and family leave wages. The credit will then be reported on Lines 11c and 13d of the Form 941.

 

When should a 941 be filed?

The deadline for filing your 941 is the last day of the month that follows the end of each quarter: April 30, July 31, October 31, and January 31. As a business owner, once you file a 941 the first time, you must file the form quarterly going forward, even if you have no taxes to report. If your business closes, you must also file a final return for the year the business closed.

 

The second quarter Form 941 and its schedules, when applicable, are due July 31 (or August 10, if all tax deposits were submitted in a timely manner for the second quarter).

 

Based on how much you’ve withheld for taxes, your company will be a monthly or semiweekly depositor, and all payments must be made through the Electronic Federal Tax Payment System. If your taxes due are less than $2,500, you can pay them when filing the return, but if your tax liability for the quarter is more than $2,500, you will be asked to make a monthly or semiweekly deposit.

 

How do I know if I need to file a 941?

Depending on how much tax you pay, you may need to file either a 941 or Form 944. For example, if you expect to have tax liability less than $1,000 annually, you may be able to file a simpler 944. If you are a new business owner, you’ll be advised on what form to file when you receive your Employer Identification Number (EIN). If you want to dive a little deeper, we’ve also got an overview of how Form 944 works as well as instructions to complete it.

 

What do you need to complete for Revised Form 941?

You’ll need to gather the following information:

 

  • 2020 Form 941 (Revised April 2020) – Downloadable PDF 
  • Your EIN and other basic business information
  • The number of employees who received wages, tips, or other compensation in the current quarter
  • The amount of wages that have been paid for the quarter
  • Any tips reported by employees
  • Federal income tax withheld from an employee’s wages
  • The employee’s portion of Social Security and Medicare taxes withheld from the employee’s wages
  • The amount of Social Security tax or Medicare tax paid by the business
  • Any employment taxes retained in anticipation of refundable tax credits or deferral
  • Any additional Medicare taxes withheld from an employee’s wages
  • Current quarter’s adjustments to Social Security and Medicare taxes for fractions of cents, sick pay, tips, and group-term life insurance
  • Any advances received from filing Form 7200, Advance Payment of Employer Credits Due to COVID-19
  • Information about qualified family or sick leave wages paid

 

Instructions for filling out Revised Form 941

The IRS released the final instructions for the updated Form 941 on June 26, 2020 in time for the end of the second quarter.

 

There are five parts that need to be completed on Revised Form 941:

 

  • Part 1 — This quarter (taxes and wages)
  • Part 2 — Your deposit schedule and tax liability for this quarter
  • Part 3 — Your business
  • Part 4 — Approve a third-party designee (optional)
  • Part 5 — Signature

 

The instructions include a worksheet (Worksheet 1) to help with the calculations. Only certain steps of the worksheet need to be completed depending on what type of qualified wages your business paid during the quarter:

 

  • Steps 1, 2, and 3 will need to be completed if an employer paid both qualified sick and family leave wages and qualified wages for purposes of the Employee Retention Credit in the quarter.
  • Steps 1 and 2 will need to be completed if the employer paid qualified sick and family leave wages in the quarter but did not pay any qualified wages for purposes of the Employee Retention Credit in the quarter.
  • Steps 1 and 3 will need to be completed if the employer paid qualified wages for purposes of the Employee Retention Credit in the quarter but did not pay any qualified sick and family leave wages.

 

Employers that paid qualified Employee Retention Credit wages/health plan expenses between March 13 and March 31, 2020, will complete Steps 3c and 3d.

 

Read on for a line-by-line explanation of all the details and calculations that are included in the Revised Form 941.

 

Form 941, Part 1:

  1. Number of employees who received wages, tips, or other compensation for the pay period including: June 12 (Quarter 2), September 12 (Quarter 3), or December 12 (Quarter 4): All employees on your payroll for the specified period need to be included, except the following: 
    • Employees currently in a non-pay status
    • Household employees
    • Farm employees
    • Pensioners
    • Active members of the Armed Forces
  2. Wages, tips, and other compensation: Enter amount of wages, tips, and other taxable compensation paid to employees for the quarter on line 2.
  3. Federal income tax withheld from wages, tips, and other compensation: Enter the federal income tax you withheld (or were required to withhold) from your employees on this quarter’s wages, including qualified sick leave wages, qualified family leave wages, and qualified wages (excluding qualified health plan expenses) for the employee retention credit; tips; taxable fringe benefits; and supplemental unemployment compensation benefits.
  4. If no wages, tips, and other compensation are subject to social security or Medicare tax: If the wages paid are not subject to Social Security or Medicare Tax withholding, check the box here and skip ahead to line 6.
  5. Taxable social security, sick and family leave, and medicare wages, and tips: Lines 5a through 5e are used to report taxable Social Security and Medicare wages and tips. You will also report any Additional Medicare Tax withholding in this space.5a. Taxable social security wages:  Enter the total of all wages subject to social security taxes you paid to your employees during the quarter. Enter the amount before payroll deductions. Do not include tips on this line.5a. (i) Qualified sick leave wages: Enter the total of all sick pay subject to (employee only) social security taxes you paid to your employees during the quarter. 

    5a.  (ii) Qualified family leave wages: Enter the total of all family leave wages subject to (employee only) social security taxes you paid to your employees during the quarter.

     

    5b. Taxable social security tips: Enter all tips your employees reported to you during the quarter until the total of the tips and wages for an employee reaches $137,700 for the year.

     

    5c. Taxable Medicare wages & tips: Enter all wages, tips, sick pay, and taxable fringe benefits that are subject to Medicare tax. Unlike social security wages, there is no limit on the amount of wages subject to Medicare tax.

     

    5d. Taxable wages & tips subject to additional medicare tax withholding: Enter all wages, tips, sick pay, and taxable fringe benefits that are subject to Additional Medicare Tax withholding.

     

    5e. Total social security and Medicare taxes: Add Column 2 from lines 5a, 5a(i), 5a(ii), 5b, 5c, and 5d 5e.

     

    5f. Section 3121(q) Notice and Demand — Enter the tax due from your Section 3121(q) Notice and Demand on line 5f. The IRS issues a Section 3121(q) Notice and Demand to advise an employer of the amount of tips received by employees who failed to report or under-reported tips to the employer. An employer isn’t liable for the employer share of the social security and Medicare taxes on unreported tips until notice and demand for the taxes is made to the employer by the IRS in a Section 3121(q) Notice and Demand.

  6. Total taxes before adjustments: Add lines 3, 5e, and 5f, and enter the total here. This will total all federal income tax withheld from wages, tips, and other compensation, the total social security and Medicare taxes before adjustments, and any tax due under a Section 3121(q) Notice and Demand.
  7. Current quarter’s adjustment for fractions of cents: Enter adjustments for fractions of cents due to rounding for both Social Security and Medicare taxes withheld. This may be a positive or a negative adjustment.
  8. Current quarter’s adjustment for sick pay: Enter Social Security and Medicare taxes withheld and deposited by third-party sick pay payers. Enter a negative adjustment for the employee share of social security and Medicare taxes withheld and deposited by your third-party sick pay payer (if sick pay is paid by a third party). These wages should be included on line 5a, line 5c, and line 5d (if the withholding threshold is met).
  9. Current quarter’s adjustments for tips and group-term life insurance: Enter a negative adjustment for:
    • Any uncollected employee share of social security and Medicare taxes on tips, and
    • The uncollected employee share of social security and Medicare taxes on group-term life insurance premiums paid for former employees.
  10. Total taxes after adjustments: Add Lines 6, 7, 8, and 9 and enter the total here.
  11. Payroll tax credits, including qualified sick and family leave wages, and employee retention credit11a. Qualified small business payroll tax credit for increasing research activities: For businesses that qualify, Form 8974 must be filled out and attached to Form 941 to claim the credit. See the IRS for more information on Form 8974 and who is eligible for the credit. 

    11b. Non-refundable portion of credit for qualified sick and family leave wages from Worksheet 1: Enter the non-refundable portion of the credit for qualified sick and family leave wages from Worksheet 1, Step 2, line 2j. The non-refundable portion of the credit for qualified sick and family leave wages applies to the employer share of social security tax on wages paid in the quarter that is remaining after it is reduced by any credit claimed on line 11a.

     

    11c. Non-refundable portion of employee retention credit from Worksheet 1: Enter the non-refundable portion of the employee retention credit from Worksheet 1, Step 3, line 3j. The non-refundable portion of the employee retention credit applies to the employer share of social security tax on wages paid in the quarter that is remaining after it is reduced by any credit claimed on line 11a.

     

    11d. Total non-refundable credits. Add lines 11a, 11b, and 11c and enter the total here.

  12. Total taxes after adjustments and nonrefundable credits: This is the total tax amount that is due. To get this number, subtract line 11d from line 10 and enter the total here.
  13. Total deposits for this quarter, plus refundable credits, minus advances received 13a. Total deposits for this quarter: Enter the total amount of tax deposits made for the quarter.This includes overpayment applied from a prior quarter, and overpayments applied from the following forms: 
    • 941-X
    • 941-X (PR)
    • 944-X
    • 944-X (SP) filed in the current quarter

     

    13b. Deferred amount of the employer share of social security tax: The CARES Act allows employers to defer the deposit and payment of the employer share of social security tax for deposits due on or after March 27, 2020, and before January 1, 2021. This can be paid in two halves. The first payment is due by December 31, 2021, and the remainder is due by December 31, 2022.

     

    13c. Refundable portion of credit for qualified sick and family leave wages from Worksheet 1: Enter the refundable portion of the credit for qualified sick and family leave wages from Worksheet 1, Step 2, line 2k. The credit for qualified sick and family leave wages consists of the qualified sick leave wages, the qualified family leave wages, the allocatable qualified health plan expenses, and the employer share of Medicare tax allocatable to those wages. The refundable portion of the credit is allowed after the employer share of social security tax is reduced to zero by nonrefundable credits.

     

    13d. Refundable portion of employee retention credit from Worksheet 1: Enter the refundable portion of the employee retention credit from Worksheet 1, Step 3, line 3k. This credit is 50% of the qualified wages you paid your employees during the quarter.

     

    13e. Total deposits, deferrals, and refundable credits: Add lines 13a, 13b, 13c, and 13d, and enter the totals here.

     

    13f. Total advances received from filing Form(s) 7200 for the quarter: Enter the total advances received from filing Form(s) 7200 for the quarter. If you’ve filed Form 7200, but haven’t received the advance yet, don’t include that amount. You’re eligible to file Form 7200 for the quarter if you’ve paid qualified sick leave wages (5a(i)), qualified family leave wages (5a(ii)), and/or qualified wages eligible for the Employee Retention Credit (11c) and the amount of employment tax deposits they retained wasn’t sufficient to cover the cost of qualified sick and family leave wages and the employee retention credit.

     

    13g. Total deposits, deferrals, and refundable credits less advances. Subtract line 13f from line 13e, and enter the difference here.

  14. Balance Due: If line 12 is more than line 13g, then tax is due. Subtract 13g from 12, and enter the difference here. This is the amount of tax you owe for the year. If line 12 is not greater than 13g, DO NOT enter anything in line 14, and move on to line 15.
  15. Overpayment: If line 13g is more than line 12, enter the difference on line 15. Never make an entry on both lines 14 and 15. If you deposited more than the correct amount for the quarter, you can choose to have the IRS either refund the overpayment or apply it to your next return. Check only one box on line 15. If you don’t check either box or if you check both boxes, the IRS will generally apply the overpayment to your next return. Regardless of any boxes you check or don’t check on line 15, the IRS may apply your overpayment to any past due tax account that is shown in their records under your EIN. If line 15 is under $1, the IRS will send a refund or apply it to your next return only if you ask them in writing to do so.

Form 941, Part 2:

  1.  Tax Liability for the Quarter. 

 

Note: There are no changes to Part 2 of the revised Form 941 (Revised April 2020), so there are no changes in the instructions for this section.

 

Based on how much you’ve withheld for taxes, your company will be a monthly or semiweekly depositor, and all payments must be made through the Electronic Federal Tax Payment System. If your taxes due are less than $2,500, you can pay them with the return, but if your tax liability for the quarter is more than $2,500, you will be asked to make a monthly or semiweekly deposit.

 

  • If Line 12 is less than $2,500, the prior quarterly return was less than $2,500, and there was no next-day deposit obligation for $100,000, you can check the first box on Line 16.
  • If you reported $50,000 or less in taxes during the lookback period, you’re a monthly schedule depositor. Check the second box on line 16 and enter your tax liability for each month in the quarter corresponding with the date of the paid wages, not the date payroll liabilities were accrued or when deposits were made. Add the amounts for each month. Enter the result in the “Total liability for quarter” box.
  • If you reported more than $50,000 of taxes for the lookback period, you’re a semiweekly schedule depositor. Check the third box on line 16. You must also  complete Schedule B (Form 941) and submit it along with your Form 941. Do not file Schedule B (Form 941) with your Form 941 if you’re a monthly schedule depositor.

Form 941, Part 3:

  1. If your business has closed or you stopped paying wages: If you go out of business or stop paying wages to your employees, you still must file a final return. Check the box on line 17 and enter the final date you paid wages. You will also need to attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.
  2. If you’re a seasonal employer: If you hire employees seasonally — such as for summer or winter only — check the box on line 18. This tells the IRS not to expect four Forms 941 from you throughout the year because you haven’t paid wages regularly. Note: Seasonal employers must file at least one taxable return each year.
  3. Qualified health plan expenses allocatable to qualified sick leave wages: Enter the qualified health plan expenses allocatable to qualified sick leave wages. You will also need to enter this total on Worksheet 1, Step 2, line 2b.
  4. Qualified health plan expenses allocatable to qualified family leave wages: Enter the qualified health plan expenses allocatable to qualified family leave wages. You will also need to enter this total on Worksheet 1, Step 2, line 2f.
  5. Qualified wages for the employee retention credit: Enter the qualified wages for the Employee Retention Credit (excluding the amount of any qualified health plan expenses allocatable to these wages). You will also need to enter this total on Worksheet 1, Step 3, line 3a.
  6. Qualified health plan expenses allocatable to wages reported on line 21: Enter the qualified health plan expenses for the Employee Retention Credit. This total is also entered on Worksheet 1, Step 3, line 3b. These expenses are generally allocatable to the wages reported on line 21. However, in some circumstances, qualified health plan expenses are treated as allocatable to qualified wages even if no wages are paid to the employees during the applicable period. For more information, go to IRS.gov/ERC.
  7. Credit from Form 5884-C, line 11, for this quarter: Enter the credit (if applicable) to be claimed on line 11 of Form 5884-C. Note: Entering an amount here doesn’t change your requirement to file Form 5884-C separately from Form 941. You’re entering the amount here to notify the IRS that you will file Form 5884-C.

 

Important: You will use lines 24 and 25 only for the second quarter filing of Form 941.

 

  1. Qualified wages paid March 13 – 31, 2020, for the Employee Retention Credit: Enter the qualified wages for the Employee Retention Credit paid March 13, 2020 through March 31, 2020 for the Employee Retention Credit. Do not include any qualified health plan expenses allocatable to these wages. This amount is also entered on Worksheet 1, Step 3, line 3c.
  2. Qualified health plan expenses allocatable to wages reported on line 24: Enter the qualified health plan expenses for the Employee Retention Credit. These expenses are generally allocatable to the wages reported on Form 941, Part 3, line 24. However, in some circumstances, qualified health plan expenses are treated as allocatable to the qualified wages even if no wages have been paid during the applicable period. For more information, go to IRS.gov/ERC. The amount from line 25 is also entered on Worksheet 1, Step 3, line 3d.

 

Form 941, Part 4:

Part 4 is used if you want to designate an employee or paid preparer or service to talk with the IRS about Form 941. If you elect yes, you will need to provide the designee’s name and phone number, as well as create a 5-digit PIN to use when talking to the IRS. The authorization will automatically expire one (1) year from the due date (without regard to extensions) for filing your Form 941.

 

Form 941, Part 5:

Complete all information and sign and date the Form 941 — and you’re all set. Note that approved signers for Form 941 include the Sole Proprietor, Corporation President, Vice President, or Principal Officer, Partnership Member or Partner, Owner of an LLC, or Fiduciary of a Trust or Estate.

 

Be sure to review your return for accuracy and send deposits on or before the due dates. If you use a payroll service provider, your 941 may be completed for your business, so be sure to check on what will be provided to you and to the IRS.

 

If you have any questions or need additional  Form 941 (Revised April 2020) instructions, you can find help on the IRS website.

 

This article has been updated with the most up-to-date information available. This article is for informational purposes only and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors for formal consultation.

 

Erin Ellison is the Content Marketing Manager for OnPay. She has more than 15 years of writing experience, is a former small business owner, and has managed payroll, scheduling, and HR for more than 75 employees. She lives and works in Atlanta.

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