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IRS Issues Form 941-X Revision for Employer Virus-Related Tax Credits

July 30, 2020, 8:16 PM

A draft of the IRS form that is used to make adjustments to a previously filed Form 941, Employer’s Quarterly Federal Tax Return, includes lines for reporting employer tax credits for coronavirus-related sick- and family-leave wages and the employee retention credit.

The draft of the revised Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, was released July 27 by the Internal Revenue Service. The proposed changes were expected because the agency recently revised the 2020 Form 941, Employer’s Quarterly Federal Tax Return, and the accompanying instructions to accommodate reporting data on employment tax relief related to Covid-19.

The finalized version of the revised Form 941 was released June 19 and its finalized instructions were released June 26. The revisions were made necessary by the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which took effect in March.

The latest version of Form 941 must be used starting with the second quarter. The January 2020 version of Form 941 should be used to report employment taxes for the first quarter of 2020, the IRS said.

Expanded Form 941-X

Form 941-X was expanded to five pages, with Part 3 comprising two pages instead of one. The changes in Part 3 include the renumbering and rewording of some existing lines and the addition of more than a dozen lines for tax relief related to Covid-19, the respiratory disease caused by the novel coronavirus. The new lines, which in some cases refer to the 2020 Forms 941 and 941-SS, the quarterly return for American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands, include:

Line 9, qualified sick-leave wages.

Line 10, qualified family-leave wages.

Line 17, nonrefundable portion of credit for qualified sick- and family-leave wages.

Line 18, nonrefundable portion of employee retention credit.

Line 24, deferred amount of the employer share of Social Security tax.

Line 25, refundable portion of credit for qualified sick- and family-leave wages.

Line 26, refundable portion of employee retention credit.

Line 28, qualified health plan expenses allocable to qualified sick-leave wages.

Line 29, qualified health plan expenses allocable to qualified family-leave wages.

Line 30, qualified wages for the employee retention credit.

Line 31, qualified health plan wages reported on Form 941, Line 21.

Line 32, credit from Form 5884-C, Line 11, for this quarter (Form 5844-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans).

Line 33, qualified wages paid March 13 to March 31, 2020, for the employee retention credit; Line 33 is used only to correct the second-quarter 2020 filing of Form 941.

Line 34, qualified health plan expenses allocable to wages reported of Form 941, Line 24 credit; Line 34 is used only to correct the second-quarter 2020 filing of Form 941.

Draft conforming instructions for the updated Form 941-X have not been released. The instructions to Form 941-X last were revised in April 2017.

Comments on draft forms may be submitted to the IRS at IRS.gov/FormsComments.

Draft forms are not final and are not to be filed by taxpayers.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergindustry.com

To contact the editor responsible for this story: Howard Perlman in Washington at hperlman@bloombergindustry.com

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