Tax compliance is ever changing, and Greenshades has completed updates to our automated payroll tax compliance software for what is NEW for Q2. What will you need to know to have a successful quarter end? First, we recommend checking out the updated 941 form on the IRS website. Here you can review all the new fields as they show on the form for Q2 of 2021. You can also go here to review the IRS instructions and see a more thorough explanation of what’s new this quarter. The changes implemented this quarter with the American Rescue Plan Act (ARPA) of 2021 require additional information regarding COBRA, qualified leave, and some additional miscellaneous details. Let’s go over some of the changes so you can be prepared to file your return by the August 2 deadline.
Employee Retention Credit
Employee Retention credit is still available
- Use Worksheet 2 on page 26 of the 941 instructions for help with determining the correct numbers for ERC wages paid after March 31 but before July 1, 2021
- Use Worksheet 4 on page 29 of the 941 instructions for help with determining the correct numbers for ERC wages paid after June 30 but before January 1, 2022
- The ERC will show up on form 941 lines 21 and 22 for qualified wages and health plan expenses related to ERC
Qualified Leave and Wages
- Wages paid with your first paycheck in April may include some qualified paid sick and family leave for days in March 2021
- If they do, those amounts get reported on lines 5a(i) and 5a(ii)
- Look to Worksheet 1 on page 26 of the 941 instructions for help with determining the correct numbers for lines 5a(i), 5a(ii), 11b, 13c, 19, and 20 of form 941 that are applicable to the reporting of the qualified paid sick and family leave, plus related costs.
- The remainder of the wages go on line 5a
- Lines 11b and 13c are at the bottom of the worksheet determining refundable and nonrefundable credits
- Lines 19 and 20 are for the qualified health plan costs allocable to paid sick and family leave
- The remaining wages paid during the second quarter that include qualified paid sick and family leave are included on line 5a
- The reason for this is the qualified paid sick and family leave wages are fully taxed at 12.4% for Social Security tax starting April 1, 2021, and the Medicare tax is now being utilized
- Use Worksheet 3 on page 28 of the 941 instructions for help with determining the correct numbers for lines:
- 23 – Qualified sick leave wages for leave taken after March 31, 2021
- 24 – Qualified health plan expenses allocable to the above sick leave report on line 23
- 25 – Amounts under certain collective bargained agreement allocable to the qualified sick leave wages reported on line 23
- 26 – Qualified family leave wages for leave taken after March 31, 2021
- 27 – Qualified health plan expenses allocable to the above family leave report on line 26
- 28 – Amounts under certain collective bargained agreement allocable to the qualified family eave wages reported on line 26
Cobra and other requirements
Cobra Premium Assistance Credit is available from April 1 through September 30, 2021.
- Here is a good resource if you need additional information.
- To be eligible for this assistance, the employee would have:
- Experienced a reduction in hours
- Experienced a change in status from full-time to part-time
- Taken a temporary leave of absence
- Been involved in a lawful labor strike
- Lost their job (unless it was voluntary or for gross misconduct)
- Elected COBRA continuation coverage
- Here is a link to the application the employee needs to complete
- There is Worksheet 5 on page 29 of the 941 instructions to help with determining the correct numbers for the COBRA Premium Assistance Credit
- The worksheet will provide numbers for form 941 lines 11e, 11f, and 13f
- Recovery Start Up Business indicator can be found on line 18b
Still have questions about the 941 for Q2 2021? The IRS has a great resource webpage for FAQs. If you would like compliance experts in your corner as you navigate these and other important tax forms, contact Greenshades by clicking below to talk to us. We’re Greenshades – let us handle that!