The IRS has released a new version of Form 941 to be used for the third quarter of 2020 onwards until further notice. The new form has significant changes allowing for reporting of FFCRA and CARES Act COVID-19 payroll tax relief policies, as well as the new employee FICA deferral.
Where to find information in Wave to fill out your Form 941
In Wave, you can access your Payroll Wage & Tax Report by 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
You will see some amounts underlined on your report, hover over those amounts to view the "tool tips" associated with that number and its relation to Form 941.
In terms of the COVID-19 qualified wages and credits, please note that your credits and/or deferrals are listed under Employer Expense column on the report. These amounts include both your claimed and unclaimed credit amounts.
Qualified wages are listed under the Wages and Taxed Wages columns. Note that if an employee has reached the social security tax wage base limit, your Wages amount will be higher than your Taxed Wages amount, because not all of the wages would have been subject to tax.
Deferral of Employee Social Security Tax
Please not 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 had 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.
Employee Retention Credit
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.
Deferral of Employer Social Security Tax
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.
Employers that requested an advance of the sick and family leave credit and/or the employee retention credit would have filed a Form 7200, Advance Payment of Employer Credits Due to COVID-19, during the quarter. The amount of all advances received from Forms 7200 filed during the quarter is reported on line 13f.
Effective date and resources
The new form will be used when filing the third quarter of 2020, Employer’s Quarterly Federal Tax Return, due October 31st, 2020.