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IRS Releases Finalized 3rd Version of Form 941 for 2020

Oct. 1, 2020, 9:25 PM

The finalized third version of Form 941 for 2020, which is to be used for the third and fourth quarters of 2020, was released Sept. 30 by the Internal Revenue Service.

Four lines—1, 13b, 24, and 25—were changed from those that were on this year’s second version of Form 941, Employer’s Quarterly Federal Tax Return, which was released June 19 and pertains only to the second quarter of 2020. The finalized third version of Form 941 for 2020 is unchanged from the draft released Aug. 28.

The only change to Line 1 was the removal of the ability to identify the number of employees who were paid for the pay period including June 12, as the third version of Form 941 for 2020 is to be used only for the third and fourth quarters.

The amount to report for Line 13b now is generally designated as “Deferred amount of social security tax” instead of “Deferred amount of the employer share of social security tax” because of the addition of the ability to defer the employee share of Social Security tax, which can occur with respect to qualifying compensation paid from Sept. 1 to Dec. 31, 2020.

Lines 24 and 25 formerly were with regard to reporting employee retention credit data for the period from March 13 to 31, 2020, using the second-quarter Form 941, but on the third version of Form 941 for 2020, Line 24 is used for indicating how much of the total deferred amount reported on Line 13b consists of the employee share of Social Security tax while Line 25 is marked as reserved for future use.

Finalized instructions for the third version of Form 941 for 2020 also were released Sept. 30.

Same-Quarter Deposits of Deferred Payroll Taxes

In addition to emphasizing revisions to Lines 13b and 24 to report data on deferrals of the employee portion of Social Security tax, the instructions for the third version of Form 941 for 2020 also clarified how to handle reporting of payroll tax liability in situations when an employer originally deferred an amount of either the employer or employee portion of Social Security tax but later paid that amount during the same quarter when the deferral occurred.

This subject also was addressed and elaborated upon in updated instructions for Schedule B of Form 941, which also were released Sept. 30, although Schedule B, Report of Tax Liability for Semiweekly Schedule Depositors, itself is not to be updated.

While the deferrals of the employer and employee portions of Social Security tax are not deferrals of liability and instead are deferrals of deposits and payments (and for the employee portion also deferrals of withholding tax from compensation), paying a deferred amount of Social Security tax in the same quarter when it was deferred would shift which data-entry field is used for reporting the liability amount. In situations when liability for an amount of Social Security tax arises on a date and that amount is deferred but paid and deposited in the same quarter when the deferral occurred, the liability amount would be reported not when the liability arose, but when the deferred amount was paid and deposited.

For example, if an employer-portion Social Security tax liability of $1,000 arose based on compensation paid to employees Oct. 7 but was deferred, and instead of repaying that amount in 2021 as authorized by the Coronavirus Aid, Relief, and Economic Security (CARES Act) the employer paid that deferred amount on Dec. 30, then if the employer is a semiweekly depositor, the employer would, with regard to the Form 941 Schedule B filed for the fourth quarter of 2020, report that $1,000 in the Month 3, Day 30 field of Schedule B instead of the Month 1, Day 7 field. If this employer were a monthly depositor for the entire fourth quarter of 2020, then in Line 16 of Form 941, the employer would include the $1,000 amount in the Month 3 field instead of the Month 1 field.

The instructions for Schedule B also were updated to provide examples for adjusting tax liability pertaining to nonrefundable credit amounts claimed on Lines 11a, 11b, and 11c of Form 941.

Adjustments for Aggregate Filing

A finalized version of updated instructions for Form 941’s Schedule R, Allocation Schedule for Aggregate Form 941 Filers, also was released Sept. 30 to reflect the changes to Form 941 for the third and fourth quarters of 2020. Schedule R is not itself to be updated for the third and fourth quarters because the schedule as revised for the second quarter is compatible with the updated instructions.

The updated instructions indicate that for Column o, which aggregate filers use to report Line 13b data for their clients, the applicable amounts to report pertain to deferred amounts of Social Security tax in general, instead of deferred amounts of the employer share of Social Security tax in particular.

Descriptions for data to report in Column x, which is associated with Line 24, and Column y, which is associated with Line 25, also were updated to accord with the revisions to these lines.

Territory Variants

The changes to the standard Form 941 for the third and fourth quarters of 2020 were incorporated into the finalized third version of Form 941-SS for 2020, which also was released Sept. 30. Form 941-SS, Employer’s Quarterly Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands, also was similarly updated earlier this year to accord with the 18 lines added to the standard Form 941 to accommodate reporting requirements pertaining to coronavirus-related employment tax relief established by the Families First Coronavirus Response Act and the CARES Act.

Finalized instructions for the third revised version of Form 941-SS likewise were released Sept. 30.

This year’s third version of Form 941 (PR), Employer’s Quarterly Federal Tax Return (Puerto Rico Version), has not been finalized, and the corresponding instructions for the third version also have not been finalized. The finalized third version of Form 941 (PR) for 2020, like the finalized third version of Form 941-SS for 2020, is to accord with the changes made to the standard Form 941 pertaining to Lines 1, 13b, 24, and 25.

Form 941-X to Be Revised for 2nd Half of 2020

While a revised version of Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, was released Sept. 10 and is to be used for adjusting a second-quarter Form 941 for 2020, Form 941-X is to be further revised to reflect changes to Form 941 for the second half of 2020, a representative of the IRS said Oct. 1 during the agency’s monthly payroll industry teleconference.

Form 941-X’s instructions are to be further updated with corresponding revisions regarding deferrals of the employee share of Social Security tax, the representative said.

An employer seeking to adjust data pertaining to a Form 941 filed for the third quarter of 2020 would, until the release of the further-revised Form 941-X, be able to use the version released Sept. 10 unless the employer specifically needs to adjust data regarding deferrals of the employee share of Social Security tax, which could be adjusted only with the upcoming revised version of the form, the representative said.

To contact the reporter on this story: Howard Perlman in Washington at hperlman@bloombergindustry.com

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

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