What you Need to Know about the Finalized Form 941 for the Second Quarter of 2021

Form 941 is now available for Q2!

Earlier in June, the IRS released a draft of the Form 941 complete with all the updates needed for the upcoming quarter. While we have seen changes to the 941 from quarter to quarter since the onset of the pandemic, some of these updates have been more drastic than others.

This quarter employers can expect many changes to the Form, especially when it comes to reporting COVID-19 related tax credits. These tax credits have been extended and expanded under the American Rescue Plan, but the way they are reported on the Form 941 has changed.

Now that the IRS has finalized the Form 941 for the second quarter of 2021, here is what employers should know and educate themselves on before filing.

There are New Lines, Here’s Why…

There are new lines for a few different reasons, first of all is the adjustments to the credits for refundable and nonrefundable sick and family leave credits. These have both been continued under the American Rescue Plan, however employers are no longer required to offer paid sick and family leave related to COVID-19.

The main takeaway here is that the refundable and nonrefundable portions of these tax credits will be calculated differently before and after April 31, 2021. So, wages being paid this quarter for sick leave taken on March 31 or earlier, will be calculated differently.

Another reason for new lines is the addition of the COBRA Assistance Subsidy, and the credit that employers can claim. This is how the COBRA Assistance Subsidy works: employees that have seen a drastic reduction of hours or have been involuntarily terminated due to the pandemic are in danger of losing their employer-sponsored health insurance.

The purpose of COBRA is for employees to stay on their insurance temporarily rather than losing it after being laid off, reduced to part time, etc. The subsidy allows employees to stay on their insurance without having to pay the high rates of COBRA premiums. Instead, the employer will cover the premium and claim a credit to recoup the costs.

The following lines have been added for the second quarter:

Line 11e- Nonrefundable portion of COBRA premium assistance credit (see instructions for applicable quarters
Line 11f- Number of individuals provided COBRA premium assistance
Line 11g- Total nonrefundable credits. Add lines 11a, 11b, 11c, 11d, and 11e
Line 13f- Refundable portion of COBRA premium assistance credit (see instructions for applicable quarters)
Line 24- Qualified health plan expenses allocable to qualified sick leave wages reported on line 23
Line 25- Amounts under certain collectively bargained agreements allocable to qualified sick leave wages reported on line 23
Line 26- Qualified family leave wages for leave taken after March 31, 2021
Line 27- Qualified health plan expenses allocable to qualified family leave wages reported on line 26
Line 28- Amounts under certain collectively bargained agreements allocable to qualified family leave wages reported on line 26

There are updated Lines, Here’s Why…

In addition to the new lines that have been introduced to the Form 941 for the second quarter of 2021, many have been amended. Many of these lines have been amended due to the change in calculations for the sick and family leave credits. Others have simply been moved down the form to make room for new additions.

The following lines have been amended for the second quarter:

Line 5a: Taxable social security wages*
Line 5a(i): Qualified sick leave wages*
Line 5a(ii) Qualified family leave wages*
- For the second quarter, the values on lines 5a(i) and 5a(ii) should reflect only the qualified wages paid after March 31, 2021 for leave taken before April 1, 2021. The value entered on Line 5a should reflect the qualified wages for leave taken after March 31, 2021
Line 11b- Nonrefundable portion of credit for qualified sick and family leave wages for leave taken before April 1, 2021
Line 11d- Nonrefundable portion of credit for qualified sick and family leave wages for leave taken after March 31, 2021
Line 11e- Refundable Portion of Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2021
Line 11g- Total nonrefundable credits. Add lines 11a, 11b, 11c, 11d, and 11e
Line 13g- Total deposits and refundable credits. Add lines 13a, 13c, 13d, 13e, and 13f
Line 13h- Total advances received from filing Form 7200 for the quarter
Line 13i- Total deposits and refundable credits less advances. Subtract line 13h from line 13g
Line 14- Balance due. If line 12 is more than line 13i, enter the difference and see instructions .
Line 15- Overpayment. If line 13i is more than line 12, enter the difference
Line 19- Qualified health plan expenses allocable to qualified sick leave wages for leave taken before April 1, 2021
Line 20- Qualified health plan expenses allocable to qualified family leave wages for leave taken before April 1, 2021
Line 23- Qualified sick leave wages for leave taken after March 31, 2021

Form 941 for the Second Quarter is Now Available from TaxBandits!

Now that employers have wrapped up the second quarter, why waste your summer days worrying about when to file the 941? You can start e-filing Form 941 with TaxBandits now and get ahead of your deadline. The e-filing process has been updated to include all the new updates to Form 941 and the aggregate 941 Schedule R.

For more information on the changes to 941 Schedule R, click here

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