Revised 941-X with COVID-19 Tax Credits Due Out Mid-to-Late September

The IRS has confirmed during its monthly payroll industry telephone conference call on August 6 that a revised version of Form 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund) with the COVID-19 tax credits will be issued in mid-to-late September 2020.

In response to the COVID-19 health emergency, the Families First Coronavirus Response Act (FFCRA) and Coronavirus, Aid, Relief and Economic Security (CARES) Act were signed into law. Both bills provide assistance to employers and workers that include a paid sick and expanded family and medical leave, an employee retention credit (ERC) and a deferral of the employer’s share of Social Security tax.

As a result, the IRS had to significantly revise Form 941 to include line items for reporting these COVID-19 tax credits . This newly revised Form 941 must be used by employers beginning with the second quarter of 2020, which was due by July 31, 2020. The IRS also revised Schedule R (Form 941) and the instructions of Schedule B (Form (941) for the purposes of reporting the COVID-19 tax credits.

The IRS is additionally revising Form 941-X and issued a draft version of this form in July 2020 with considerable changes to “Part 3: Enter Corrections for This Quarter” to add adjusted reporting for the COVID-19 tax credits. The draft instructions for this form have not been issued. This revised form will be issued in mid-to-late September 2020.

An IRS representative on the call explained that an employer may use the current 2017 version of Form 941-X to make a correction to a previously filed Form 941 if adjustments are not being made to any of the COVID-19 tax credits. The IRS representative added that this should include the deferral of the employer’s share of Social Security tax, which should be accomplished using the revised Form 941-X.

The revised Form 941-X should be used for corrections to calendar quarters beginning with the second quarter of 2020, but can also be used to make non-COVID-19 tax credit corrections prior to the second quarter 2020.

The IRS representative also noted that the IRS typically only posts draft versions of a form if it believes the form will not change so that draft forms may be relied upon for programming and planning purposes. This may be helpful to employers and payroll providers that are working to implement the changes to the Form 941-X ahead of the final form release date.

A participant on the August 6 IRS call from ADP payroll services asked if the IRS could expedite the release date for the revised 941-X because there are a number of clients that are eager to get amendments related to the COVID-19 tax credits processed quickly. The IRS said that it is working as diligently as it can to get the 941-X out as soon as possible.