The IRS Released Helpful Updated Instructions for Form 941, Q1

Answering your questions about Q1 of 2021.

Businesses and tax professionals have a lot on their mind this spring, as we continue to see changes to tax forms due to COVID-19, another round of PPP loans, and an additional stimulus package was signed into law. 

It’s hard to believe that the first quarter deadline of 2021 is already in sight! The IRS has officially updated the instructions for filing Form 941, now is the time to get a handle on what has changed and what is new on the Form 941 for the first quarter deadline. 

Here are some of the questions that the updated instructions address. To read these IRS instructions in their entirety, click here.

Can I defer my employees’ share of social security taxes or my own in 2021? 

The answer is no, you can no longer defer the amount of social security taxes your employees owe. This deferment was put into place by an executive order of the last administration and expired on December 31, 2020. 

You can also not defer your (employer) share of social security taxes, as of January 1. 2021. 

There are no longer any lines on the Form 941 where employers can report the deferred share of their employees, as it is no longer allowed. The lines that were used to report this information for the fourth quarter of 2020 are no longer available. Both lines 13b and 24 have been reserved for future use. 

When do I need to pay the deferred share of employee social security taxes? 

These updated instructions also offer guidance for employers who need to collect and pay back their employees’ share of social security taxes. These taxes were allowed to be deferred between September 1, 2020 and December 31, 2020.

Now, that this deferment period is over, it’s time to plan the repayment of these taxes. According to the finalized instructions for the first quarter, employers must plan to pay the deferred taxes back between January 1, 2021 and December 31, 2021. 

Can I claim the employee retention and sick and family leave credits? 

Yes, these credits were extended by The Taxpayer Certainty and Disaster Tax Relief Act of 2020. As of December 31, 2021, employers are no longer mandated to provide their employees with two weeks of paid sick and family leave. However,  employers that choose to continue offering leave for their employees can still claim tax credits for qualifying wages. 

Employers can claim taxes on qualifying wages that were paid before April 1, 2021. 

The Employee Retention Credit was also updated under the Taxpayer Certainty and Disaster Tax Relief Act. This credit can be claimed on 70% of qualifying wages through June 30, 2021. Employers still have the option to reduce their deposits on Form 941 and request an advance request of these credits on Form 7200 for 2021

E-filing Form 941 with TaxBandits

Our team is not only here to offer you the latest IRS updates and information, that’s just the beginning! TaxBandits offers a simple, yet complete e-file solution for over 70 IRS employment and payroll tax forms. This includes the Form 941. 

So, when it comes time to file Form 941 for the first quarter of 2021, TaxBandits is here to help you file quickly and efficiently with built in tools like 941 Worksheet 1, a zero-filing feature for employers with no taxes to report, and bulk upload capabilities for tax professionals filing on behalf of their clients!

Form 941

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