The IRS has released a new version of Form 941 to be used for the second quarter of 2021 onwards, until further notice. Notable changes are in response to the American Rescue Plan, for reporting of COVID-19 leave programs paid out during the second quarter.
In this article
- Quarter 1, 2021 updates
- Overview of changes for Quarter 2, 2021
- Using Wave to fill out Form 941
- Effective date and resources
Quarter 1, 2021 updates
Deferral of Employee Social Security Tax
Please note that while Wave has this deferral available to apply to your employees, we are still working hard to update the Wage & Tax Report to appropriately reflect these updated Form 941 instructions.
Employees are allowed to defer their portion of the social security tax from September 1, 2020 onward. This will be reporting on Line 13b, in combination with any employer social security tax deferred amounts.
The specific portion of Line 13b that includes only the employee share of the social security tax that was deferred is to be reported on Line 24.
Sick and Family Leave Wages
Qualified sick leave wages and family leave wages that were subject to social security tax are reported in Column 1 of 5a(i) and 5a(ii), with the employee share of social security tax on those wages is reported in Column 2.
Note that these amounts are not to be included in line 5a.
Expanded Family and Medical leave wages and credits are reported in combination with Family and Medical leave wages and credits.
The new credit for qualified sick and family leave wages is reported on line 11b and line 13c. These amounts are calculated using Worksheet 1 (page 14 of Form 941 instructions).
Note that the Worksheet will ask you for any remaining qualified wages that weren't reported in Column 1 of lines 5a(i) and 5a(ii) due to the social security wage base limitation. If you have an employee who reached this limitation, you will see a difference between the amounts listed under the Wages and Taxed Wages columns on your Payroll Wage & Tax Report.
Qualified health plan expenses allocable to sick and family leave wages are reported on lines 19 and 20.
The new employee retention credit (ERC) is reported on line 11c and line 13d. These amounts are calculated using Worksheet 1 (page 14 of Form 941 instructions).
Qualified wages (excluding qualified health plan expenses) for the employee retention credit are reported on line 21. Qualified health plan expenses allocable to the qualified wages for the employee retention credit are reported on line 22.
For the second quarter Form 941 only, qualified wages (excluding qualified health plan expenses) for the employee retention credit and qualified health plan expenses allocable to the qualified wages for the period from March 13, 2020, to March 31, 2020, are reported on lines 24 and 25, respectively.
Employers can defer the deposit and payment of the employer share of social security tax otherwise due during the calendar quarter. The amount of the deferral is reported on line 13b in combination with any employee deferred social security tax.
While the amount is listed as a negative on your Payroll Wage & Tax Report, note that this must be entered as a positive value on line 13b.
Please note that Wave is currently working to support the employee social security tax deferral.
Overview of changes for Quarter 2, 2021
Lines 5a, 5a(i), and 5(ii)
- These lines exist on the Q1 Form 941 however for Q2 they are marked with an asterisk. In an info box to the right of these fields, the IRS explains why
- Line 5a: Enter the taxable social security wages and include taxable qualified sick and family leave wages taken after March 31, 2021 (ARP leave). Do not include the qualified sick leave wages reported on line 5a(i) or qualified family leave wages reported on line 5a(ii) for leave taken before April 1, 2021.
- Line 5a(i): Enter taxable qualified sick leave wages paid out after March 31, 2021 for leave taken before April 1, 2021 (FFCRA).
- Line 5a(ii): Enter taxable qualified family and medical leave wages paid out after March 31, 2021, for leave taken before April 1, 2021 (FFCRA).
Line 11b: This line reports the nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021 (FFCRA).
Line 11d: This line reports nonrefundable credit for qualified sick and family leave wages, for leave taken after March 31, 2021 (ARP)
Line 13c: This line reports refundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021
Line 13h: This line reports the amount of all advances received from Form 7200, Advance Payment of Employer Credits Due to COVID-19, filed during the quarter.
Line 23: This new line reports the qualified sick leave wages for leave taken after March 31, 2021.
Line 26: This new line reports qualified family leave wages for leave taken after March 31, 2021.
Where to find information in Wave to fill out your Form 941
In Wave, you can access your Payroll Wage & Tax Report using the left-hand menu:
- Click Reports
- Click Payroll Wage & Tax Report
- To generate a report that includes your COVID-19 qualified wages and credits, you must either choose to run a quarterly report or annual. For the purposes of your Quarter 2 Form 941, choose Previous Quarter.
- Click Generate Report
COVID-19 qualified wages and credits, and deferral amounts are listed under Employer Expense column on the report. The amounts shown include both the claimed and unclaimed credits.
Qualified wages are listed under the Wages and Taxed Wages columns. If an employee has reached the social security tax wage base limit, the Wages amount will be higher than the Taxed Wages amount because not all of the wages would have been subject to tax.
Effective date and resources
The new form will be used when filing the Quarter 2, 2021, Employer’s Quarterly Federal Tax Return, due by Monday August 2, 2021 (as the July 31, 2021 due date for filing falls on a Sunday, you may file your return on the next business day).