IRS Releases Draft Form 941 for Reporting Coronavirus-Related Employer Tax Credits

May 11, 2020

Taxpayers and tax preparers have been awaiting revised tax forms and instructions since the introduction of the new employment tax credits stemming from the coronavirus relief legislation, including the FFCRA and the CARES Act. On April 29, the IRS finally released a Draft Form 941 (the Employer’s Quarterly Federal Tax Return), which included 23 new data-entry fields to address the additional reporting needs for the new credits, including the employee retention credit and the credits for qualified sick and family leave wages. The draft form, now expanded from two pages to three, also includes lines to report the deferred amounts of employers’ shares of Social Security taxes and the total advances received for advanced payment on these credits.

Draft FYI

Draft instructions accompanied the new Draft Form 941 to provide further insight into the added data-entry fields and worksheets to help calculate items like the nonrefundable portions of the new employment tax credits. While the new draft form and instructions provide further insight and guidance into how employers will be filing for the coronavirus-related employment tax credits on a quarterly basis, the form and instructions are both still considered in their draft form, and further changes in the future are possible. Nonetheless, employers and tax preparers should use the revised form beginning with the second quarter of 2020, which extends April 1 to June 30.

Comments or questions can be directed to the IRS, though some questions may already be answered through the IRS’s FAQ pages. One FAQ page includes responses to 94 common questions (and counting) on a range of topics related to the employee retention credit, while another FAQ page includes responses to 67 questions (and counting) on topics related to the credits for qualified sick and family leave wages.

The bottom line

If you are planning to leverage these credits to help your company manage cash flow during the coronavirus crisis, you will need an advisor like Aprio to help ensure you are satisfying the full eligibility and reporting requirements. Aprio’s payroll tax credit experts can help you develop a comprehensive tax credit strategy to maximize your benefit and claim the credits quarterly. Contact Carli Huband, Partner-in-Charge of Aprio’s R&D Tax Credit Services, for more information.

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About the Author

Carli Huband

Carli is the partner-in-charge of R&D Tax Credit Services at Aprio. Carli has dedicated the last five years to performing R&D Tax Credit studies for clients in a variety of industries, with a specialty in the manufacturing and technology industries. She has worked to prepare R&D Tax Credits for companies ranging from startups to Fortune 500 businesses, performing technical interviews with subject matter experts, calculating complex credits and preparing technical reports.