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APA Requests Guidance on Draft April 2020 Form 941 and Instructions

BY: Alice P. Jacobsohn, Esq. | 06/17/20

APA asked the IRS for guidance on the April 2020 Draft Form 941, Employer’s Federal Quarterly Tax Return, and its instructions.

The issues APA raised include:

  • Receipt of advance credits through the Form 7200, Advance Payment of Employer Credits Due to COVID-19, and claiming a credit on Form 941
  • Deferrals from the first quarter of 2020
  • Priority order for deducting remaining taxes if an employer exceeds its social security payment
  • Accounting for the employee retention credit when an employee is allowed negative accruals of paid leave
  • Accounting for benefits provided to employees who are furloughed because of COVID-19

The Form 941 instructions require employers to account for advance credits from the Form 7200. However, the reference for completing the Form 941 is based on “received” advance credits. APA was concerned that if an employer has not yet received the payment and does not include a credit on Form 941 because a Form 7200 was filed, the employer would not get the credit at all. APA also was concerned about the potential for errors in double accounting for the credit by mistake.

APA also asked the IRS whether the agency established a priority order for tax deductions if credits exceed the amount of an employer’s social security payment. The total credit is based on commingled withheld and employer taxes, such that the IRS may decide not to establish a priority order.

Employers may allow an employee’s leave account to have a negative balance because of COVID-19-related absences (i.e., 80 hours of unearned leave). APA asked the IRS whether this leave was subject to the wages eligible for the employee retention credit.

In addition, APA requested guidance on how to account for benefits provided to furloughed employees. Normally, benefits are provided to employees who work a certain number of hours for an employer. As part of COVID-19 relief, an employer may continue to provide benefits to employees who are furloughed or working below the threshold number of hours.

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Alice P. Jacobsohn, Esq., is Senior Manager of Government Relations for the APA.