The IRS has released a draft of the revised Form 941 (Employer’s Quarterly Federal Tax Return) and its instructions for 2020. The form reflects significant changes to allow for the reporting of new employment tax credits and other tax relief related to COVID-19. The new form includes lines for:
• Credit for Qualified Sick and Family Leave Wages
• Employee Retention Credit
• Deferred Amount of the Employer Share of Social Security Tax
The new credit for qualified sick and family leave wages is reported on line 11b and, if applicable, line 13c. The new employee retention credit is reported on line 11c and, if applicable, line 13d. There also are new lines to report (1) the deferred amount of the employer’s share of Social Security tax during the calendar quarter and (2) total advances received from filing Form 7200 (Advance Payment of Employer Credits Due to COVID-19) for the quarter.
The CARES Act allows employers to defer the deposit and payment of the employer share of social security tax for deposits due on or after March 27, 2020, and before January 1, 2021. However, please note that the Instructions for Form 941 state that “you can’t defer tax that you already paid.” The IRS indicated that the deferred amount of the employer share of social security tax is a deferral of deposits and payments, not a deferral of liability. You won’t receive a refund or credit of any amount of the employer share of social security tax already deposited for the quarter. Unfortunately, this means that for taxpayers who applied for the PPP loan but did not get clarification that they were eligible for this deferral until several weeks after the law was enacted under the CARES Act will not be able to get the deposits already made refunded.
Employers who have received a PPP loan may defer deposit and payment of the employer share of social security tax that otherwise would be required to be made beginning on March 27, 2020, through the date the lender issues a decision to forgive the loan without incurring failure-to-deposit and failure-to-pay penalties. Once an employer receives a decision from its lender that its loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer share of social security tax due after that date.
Should you have any questions, please don’t hesitate to reach out to your tonneson + co representative.