Now that the IRS has released the finalized Form 941 for the second quarter of 2021, employers and tax professionals alike are trying to wrap their heads around the many updates.
One of the most notable differences between this quarter and the last is the number of worksheets needed to calculate the nonrefundable and refundable portions of COVID-realted tax credits.
Why the move from one 941 Worksheet to five?
While this may seem overwhelming, the main reason for adding these additional worksheets is to help employers adjust to the changes on Form 941 this quarter, mainly because they will calculate credits differently before and after March 31, 2021.
Not all employers will need all 5 worksheets and even employers who are claiming all the available credits will only use a maximum of 4 worksheets.
That being said, let’s take a deep dive into the worksheets for the second quarter.
What is the Purpose of each 941 Worksheet?
Each Worksheet is used to calculate different COVID-19 related tax credits which employers can claim on qualified wages throughout the quarter.
Worksheet 1: Credit for Qualified Sick and Family Leave Wages for Leave Taken Before April 1, 2021
Worksheet 2: Employee Retention Credit for the Second Quarter of 2021 Only (Wages Paid After March 31, 2021, and Before July 1, 2021)
Worksheet 3: Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2021
Worksheet 4: Employee Retention Credit for Third and Fourth Quarters of 2021 Only (Qualified Wages Paid After June 30, 2021)
Worksheet 5: COBRA Premium Assistance Credit
How many 941 Worksheets should I complete?
This will depend on the types of credits you are eligible for this quarter. Employers only need to complete the worksheets that apply to them. For example, if you are only claiming the employee retention credit, complete Worksheet 2. If you only claimed credits for qualified sick and family wages, complete Worksheets 1 and 3. If you claimed all available credits during the quarter, complete Worksheets 1, 2, 3, and 5.
It is important to note that Worksheet 4 is only applicable to the third and fourth quarters of 2021, so no employer needs to use this worksheet this quarter.
Worksheet 5 is used solely to calculate the COBRA premium assistance credit, this is a new credit available to employers under the American Rescue Plan.
The IRS created all of the worksheets to be used as tools to help employers file the Form 941. The IRS doesn’t expect or require filers to attach worksheets to the Form 941, these are just a guide to help with calculations. However, it is a good idea to keep the worksheets for your records. If you later find mistakes on your Form 941, these may be helpful for reference.
Can I use 941 Worksheets if I e-file with TaxBandits?
Yes! Worksheets 1-5 are extremely helpful when calculating the refundable and nonrefundable portions of COVID-19 tax credits. That’s why the TaxBandits team incorporated the Worksheets into the Form 941 e-filing process. As you complete the Form 941, you can complete the necessary worksheets to calculate the amounts needed for certain lines of the form.
Check out the Form 941 e-filing process in this video!