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Draft Form 941 Accommodates Reporting of COVID-19 Employment Tax Credits

BY: Jyme Mariani, Esq. | 05/01/20

At the end of April, the IRS issued drafts of the 2020 Form 941, Employer’s Quarterly Federal Tax Return, and its instructions to be used beginning with the second quarter return (April 1 to June 30) that must be filed by July 31. The revised form will have “significant changes” to allow reporting of new employment tax credits and other tax relief related to the novel coronavirus (COVID-19). The draft form cannot be filed, but the IRS should release the final version soon.

Significant Changes

The revised Form 941 will contain extensive changes, including:

  • Parts 1 and 3 of Form 941 will be significantly expanded to account for the new credits eligible employers can claim for COVID-19-related qualified paid sick leave and expanded family and medical leave and the employee retention credit. Employers choosing to defer their portion of social security tax will also report the deferral on the Form 941.
  • Employers will use the new Worksheet 1, Credit for Sick and Family Leave Wages and the Employee Retention Credit, to calculate these credits.
  • Employers that requested an advance of the qualified leave credits and/or the employee retention credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, will report the amount of the advances on the revised Form 941.

Employee Retention Credit Wages Paid in March

Employers that paid qualified wages and qualified health plan expenses allocable to those wages between March 13-31, 2020, for the employee retention credit will report that information on their second quarter Form 941.

Complete coverage of the revised Form 941 and its instructions will be available in the May edition of Payroll Currently, published on May 8.

To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!


Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.