The IRS Released A Draft of Form 941 for Tax Year 2021
On January 29. 2021, the IRS released an updated draft of the Form 941 for the 2021 tax year. While it must be noted that this is a draft and not a copy that should be filed or used in official capacity with the IRS, this draft does provide helpful information on what employers can expect for the first and second quarters of 2021.
There was much debate over what the Form 941 for 2021 may look like, as many COVID-19 measures were due to expire on December 31, 2020.
Now that these tax credits have been extended, the Form 941 for 2021 looks quite similar to what employers have become accustomed to in the last two quarters of 2020.
Background on the Form 941
The Form 941, Employer’s Quarterly Federal Tax Return, must be filed quarterly with the IRS. This form is used to report employment wages and taxes withheld.
The fourth quarter deadline for Form 941, just passed recently on February 1, 2021. Employers must reconcile their COVID-19 tax credits on Form 941, even if they filed Form 7200 during the quarter.
The Taxpayer Certainty and Disaster Relief Act
This act was signed into law on December 27, 2020 to extend necessary COVID-19 tax credits, including the employee retention credit and paid sick and family leave credits.
In addition to extending these credits, the employee retention credit has been expanded and clarified in this Act. This Act also extends the period in which deferred social security taxes can be collected from employees.
Employers that qualify for these tax credits can continue to reduce their deposits and report these credits on their Form 941 for 2021, at least for the first two quarters.
What’s changed in this draft?
One of the forms of tax relief addressed by the Taxpayer Certainty and Disaster Relief Act is the deferral of the employees’ share of social security taxes.
On the Form 941 for 2021, employers no longer have to indicate the amount of their employees’ share of social security taxes was deferred, because employers will no longer have the option to defer this. Although, the period for collecting the deferred social security payments has been extended to between January 1, 2021 and December 31, 2021.
In the Form 941 for the third and fourth quarters of 2021, these lines were dedicated to deferred payments of social security taxes.
Line 13b- Deferred amount of social security tax
Line 24- Deferred amount of the employee share of social security tax included on line 13b
On the Form 941 for 2021, these lines are now reserved for future use.
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