Form 941

[hillsboro15269]

I don't know if anyone knows this....

I do payroll for a few clients. I don't use any software, because they all charge too much for what they offer. (Or, better put, I have developed my own software for paper-filing of the forms).

But this quarter, with the COVID credit... The IRS says we're supposed to claim any payroll expenses paid after 3/12/20 on the 2nd quarter return.

Two questions: 

1. Does anyone know exactly how that works? I mean, practical "this is how you do it," not concepts, which I get.

2. What about states? Are they also allowing us to put 3/12-3/31 payroll on 2nd quarter, or do we essentially have to run 2 different payroll periods, one for federal and one for state?

Bonus question: does anyone know if QuickBooks' tax program does this correctly?

[Just-Lisa-Now-]

Form 7200 is for the credit...I started filling it out then realized it goes with second quarter, not first, but you include the last part of March on it for the credit.

I think 1st quarter 941 is done regularly...at least thats how Im doing them. I only have a few that I do the quarterlies for and they only have a few employees each.

[abctax55]

Q1..due 4.30.20 is not impacted.

Q2.. Will be.  There's no official form yet to show specifics.

Nope, despite QBs instructions, I'm not able to get it to 'work' the way I think it should in terms of picking up the credit against any liabilities.  Neither could my best friend. Perhaps we both did it wrong. 

[rbynaker]

While we're on the subject . . . what about the deferral of the employer SS tax as a result of the CARES act?

I have a client who pays himself quarterly (S Corp).  Since he paid himself after the CARES act was signed I think he can technically defer the employer SS tax (50% due 12/31/21, 50% due 12/31/22).  I mentioned it to him and he said he'd rather pay it and then not have to remember later, but I didn't see any mechanism for tracking that anywhere if he did want to defer.

PS: I also don't do many payrolls.

[garman22]

Interesting, I only do like 3-4 clients and they are the only ones on the payroll. I've also heard it will impact 2nd qtr. So we have some time after 04/15 to do our homework. Oh joy!!!!

[Just-Lisa-Now-]

The payroll I do they've all told me they dont want to defer, they want to pay it now too....thank goodness, I didnt want to try and keep track of it!

[hillsboro15269]

When you say "Q1 due 4.30.20 is not impacted" I'm not quite sure what you mean.

The IRS says, and I quote: << If you paid any qualified wages between March 13, 2020, and March 31, 2020, inclusive, you will include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on your second quarter Form 941. >>

Now, unless we're supposed to report wages from 3/13-3/31 twice, to me that seems to mean that we're NOT supposed to report 3/13-3/31 wages on Q1, so it most certainly DOES impact Q1.

If the state wants us to report 3/13-31 wages in Q1, like we're supposed to, we have to run 2 totally different payroll reports.

And, as I said, I'd be surprised if any software out there is going to do this correctly. Which means anyone who uses software to calculate quarterly reports is, erm, expletive deleted.

It seems to me like everyone is going to have to do payroll by hand Q1, and/or do a crapload of amendments.

[Just-Lisa-Now-]

Did you read the instructions with the Form 7200?   

That's where the credit for the wages from March 13th-31st happen as well as the credit for the 2nd quarter wages....at least that how I understood it when I read them last week.

[abctax55]

Rick... THAT one makes my head hurt.

[rbynaker]

---

@hillsboro15269 wrote:

When you say "Q1 due 4.30.20 is not impacted" I'm not quite sure what you mean.

The IRS says, and I quote: << If you paid any qualified wages between March 13, 2020, and March 31, 2020, inclusive, you will include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on your second quarter Form 941. >>

My brain is a bit fried, but aren't "qualified wages" the COVID-19 wages (i.e. the two "new" forms of sick leave)?  So not "regular" wages (which would still be reported in Q1), but wages that get subsidized under the FFCRA?

[abctax55]

The 1st quarter 941 is done the same way it has been done previously. 

ALL of these changes take effect on 4.1.2020 which only impacts the 2nd quarter F 941.  IF your credits, including picking up late March numbers, exceed the amounts for the 2nd quarter deposits, the excess can be claimed on F 7200 to get a quick 'refund'.  The whole point is to try to get cash into the hands of small employers.

[abctax55]

Somebody (Intuit? Paychex? ADP?) must have at least a draft 941 for Q2 to use to determine how to update their programming...wish I had a copy too.

[BobKamman]

I think people here are talking about two different things.  There is the deferred payment of employer half of FICA tax, which I think applies to wages paid in late March.  And then there is the credit, claimed on Form 7200, for all of the wages paid to certain employees in certain circumstances.  Does Form 7200 have anything to do with deferred payment of FICA?  I'll take another look after this week.  

[qbteachmt]

The IRS is supposed to be updating the 941 to give tracking for the deferred amount.

The Liability Due Date is what is used for the deferral, not the Paycheck date. The rule was based on Implementation date, which became March 27.

As usual, a developing story.

[abctax55]

Future viewers of this post - Do NOT take my word for any of this; I'm still trying to learn it myself.

Bob... I don't know.  I've looked at all these various options until my head is spinning 😫

One of them has a requirement that you'll need to document that there's been a % (50?) decline in revenue between comparable periods - I think that's the pay half now/half later one.

The FF??? one - which is sick pay for two weeks, family leave for ten weeks (I think those are the time lines..) is the one that a credit for wages paid (even tho EE's aren't working...) is where the credit/offset of any 941 deposits plus filing F 7200 to get cash flow back to the ER comes in.  THAT's the one QB has issued instructions on how to implement, but it isn't working right (or, I don't have the info entered correctly)

BUT, I need to work up a flow chart to be sure.  A good Easter Sunday project?

[abctax55]

@qbteachmt - Michelle, have you tried going thru the QB steps to add the various payroll items?  Is it working for you?

I'm not seeing the credit appear on the P/R summary, or on the Balance Sheet under the COVID Credit set up as a current liability (per QB's instructions).

[qbteachmt]

For QB payroll, you would need to have installed the payroll tax table update listed here:

https://quickbooks.intuit.com/learn-support/en-us/payroll-taxes/latest-payroll-news-and-updates/00/3...

And that isn't "new enough" really.

I never "did payroll" for anyone on a routine basis. I consulted with them and trained them and set things up and amended things, and helped them get the tasks organized and on time. I did a lot of forensic work, too, because there is a lot of fraud and embezzlement out there, even when you hope it was simple incompetence.

When I taught, I only used sample files, which never update their tax tables. I stopped teaching in 2015, but had to take over one class in 2018. I thought I was "retired" from that school.

I no longer support QB clients; I specifically managed to be Self-Unemployed in Sept, after 2 years of telling clients, "I am no longer working." That lasted 5 months. In Feb, one of my first clients that also was my last to let go, a local governmental entity, came back with a vengeance. The financial manager I passed off the contract to had spun out of control back in Nov. I spent 10 days catching up, reviewing, correcting, refunding to their customers, and otherwise working through 6 months of work in that 10 days, for quarterly, year end, audit prep, State reporting, etc, to get up to date to mid-March, and now I am running it again while shopping for a new financial manager.

I can't seem to quit it.

[abctax55]

Thanks... I'm current on all updates.  Their instructions, followed by myself & a colleague, don't seem to achieve the correct results yet.  There's time - but not a lot.  I do have payrolls to do for clients that are in this situation.  Yes, I know I can just have them hold off on making deposits, but if the file isn't working correctly, it is likely the 941's won't be correct come July 31.  I could always "reenter" the payrolls once things are working correctly.. in my spare time. /S

[qbteachmt]

@abctax55 

Did you see that I put a couple of ideas for QB Payroll in this topic?

https://proconnect.intuit.com/community/tax-talk/discussion/re-6-2-federal-payment-delay/01/75335#M2...

[abctax55]

deleted...

[qbteachmt]

"The deferral applies to deposits and payments of the employer's share of social security tax that would otherwise be required to be made during the period beginning on March 27, 2020, and ending December 31, 2020. (Section 2302 of the CARES Act calls this period the "payroll tax deferral period.")

The Form 941, Employer's QUARTERLY Federal Tax Return, will be revised for the second calendar quarter of 2020 (April - June, 2020). Information will be provided in the near future to instruct employers how to reflect the deferred deposits and payments otherwise due on or after March 27, 2020 for the first quarter of 2020 (January – March 2020). In no case will Employers be required to make a special election to be able to defer deposits and payments of these employment taxes."

From here:

https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-20...

[hillsboro15269]

abctax55 says << The 1st quarter 941 is done the same way it has been done previously.  >>

This is in direct contradiction to the directions on the Q1 941 from the IRS. The IRS forms ***clearly*** indicate that 1/2 of the March numbers (or, specifically, payroll expenses from 3/12-3/31) should be reported in Q2.

Now, I'm not saying it's impossible that the IRS is wrong and that you are correct. But... with a quote from the IRS vs. a quote from someone on a message board, even if they are Level 15, I'm not sure how much weight that carried with the IRS. Nowadamene?

[Just-Lisa-Now-]

Youre saying the instructions for the 1st quarter 941 have been updated? can you please give a link to that? The most recent instructions I have seen are dated Jan 2020, long before Covid- 19

[Just-Lisa-Now-]

Oh wait, I did just find this....to claim the employee retention credit, employers that paid qualified wages during the period from March 13, 2020, through March 31, 2020, are to include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on the employer’s second quarter Form 941, Form 941-SS or Form 941-PR.* The release explicitly states that employers are not to include the credit on the first quarter Form 941, Form 941-SS or Form 941-PR.

[hillsboro15269]

Oy.

Here's what the various instructions from the IRS indicate.

(insert caveats here ... actual mileage may vary, yada yada yada)

50% of ALL PAYROLL TAXES (not FICA and not just the ER portion of FICA, but ***all payroll taxes,*** including withholdings as well as EE portions) ***up to $10,000***, will be given AS A REFUNDABLE CREDIT to employers who manage to pay their employees from after 3/15/20 and before 1/1/21.

So, take me. I've got 10 EEs (most part-time) representing about $10k of payroll per month, which includes ~$1500 of federal taxes (and ~$600 in state taxes, but ignore that for now). At the end of March, I should have made a deposit of ~ $1500, but instead it was ~$750, just through 3/15. The other $750 was to be reported in 2nd quarter, per IRS directions.

If I'm reading this correctly, Q2 will include my usual $4500 (3 months) + the $750 from Q1, for a total of $5250. If I want, I can claim a credit of $4,750, and get that amount as a check from Uncle Sam (that's what "refundable credit" means), or I can leave it on the account for the 3rd quarter, where it will more than cover that Q's 4500, and I can get the $250 then, or leave it as a credit for 4th Q, and so on.

I can get that credit ahead of time, using Form 7200, but then I'd have to pay Q2 and Q3 like normal. Or I can simply leave the credit on the books and not pay the taxes. This is what we do with credits.

Every employer who has payroll expenses during this time gets to do that. As a thank-you for paying people instead of putting them on unemployment. Thank you, Ms. Shoebox, for paying your employees. Here's a little sum'm sum'm for your troubles. That's how I read it. They're paying $10k of employees' taxes, as long as I keep paying the wages.

Which is how the hell it should be. Pardon my French. (Wait, isn't that German?)

Then again, now that I write it out, it makes too much sense, so I'm probably wrong.

[abctax55]

deleted... I'm done with this thread.

[qbteachmt]

No.

This topic still has two different provisions intertwined.

The $10,000 Credit is not the same thing as the SocSec/FICA deferral.

[qbteachmt]

I posted a Listing for clarity, here:

https://proconnect.intuit.com/community/coronavirus/discussion/starting-the-list-do-your-own-researc...

Note there are Two References for $10,000 amounts for Employers, neither of which as anything to do with the deferral of submitting a 941 or the delayed payment. There is a provision that sort of bumps shoulders with that concept, for keeping the Employee share of the tax withholdings so the Employer is sort of prepaid for what they can get as a credit.

Doing your own research, of course, is how you find what specifically applies to every situation.

[hillsboro15269]

Can you point me in a direction where I would find information about the SocSec/FICA deferral? 

[hillsboro15269]

Also, I ***AM*** trying to do my own research. There is very little information out there, and what there is is poorly written and self-contradictory. No one at IRS is answering their phone.

There's nothing published on this stuff that I can find. And if anyone tells me to go to irs.gov I swear I'm going to hunt them down and shoot them.

[BobKamman]

IRS issued an FAQ on April 10 that advises us, not surprisingly, 

"Information will be provided in the near future to instruct employers how to reflect the deferred deposits and payments otherwise due on or after March 27, 2020 for the first quarter of 2020"

I think that means you'll have answers by April 29. 

I saw this coming and put off writing a couple paychecks until April 1.  Employees cooperated.

https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-20...

At least people know about this.  No one is asking about the deferral of SE tax, which could be factored into the computation of 2020 estimated-tax payments.  

[qbteachmt]

"Can you point me in a direction where I would find information about the SocSec/FICA deferral?"

I put a lot of time and effort into gathering the resources at my link. Especially, when you read that info, pay attention to the difference between "Employer Tax payment due is deferred" and "Employee tax amounts can be Kept by the employer" because these are the two different provisions that seem to be confused in initial questions.

[hillsboro15269]

Thank you, and it's clear you put a lot of time and effort into preparing that document.

I'm still not seeing anything that mentions a FICA deferral, specifically. Are you speaking of the ERC, which doesn't mention a FICA deferral specifically, but seems to imply it? Or is there something I'm missing? (I'm somewhat visually impaired, so I will completely accept that I'm just not seeing it. No matter how big I blow up the screen, sometimes I just miss things. It's really fun when people say, "It's right there, are you BLIND?" and I can answer, "Yes, I am, and thank you.")

[qbteachmt · Accepted solution]

"I'm still not seeing anything that mentions a FICA deferral"

More links, then (and I put them in that Listing topic, because I like one resource, in one place, for everyone to access. Feel free to post your own links there...):

https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-20...

https://www.irs.gov/pub/irs-drop/n-20-22.pdf

https://www.irs.gov/coronavirus/employee-retention-credit

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

"What are the applicable dates by which deferred deposits of the employer's share of social security tax must be deposited to be treated as timely (and avoid a failure to deposit penalty)?

The deferred deposits of the employer's share of social security tax must be deposited by the following dates (referred to as the "applicable dates") to be treated as timely (and avoid a failure to deposit penalty):

1. On December 31, 2021, 50 percent of the deferred amount; and
2. On December 31, 2022, the remaining amount."

The deferral is not available to an employer using certain of the other provisions, however.

"May an Eligible Employer receive both the tax credits for the qualified leave wages under the FFCRA ...

Yes, but not for the same wages.  The amount of qualified wages for which an Eligible Employer may claim the Employee Retention Credit does not include the amount of qualified sick and family leave wages for which the employer received tax credits under the FFCRA.  

May an Eligible Employer receive both the Employee Retention Credit and a Small Business Interruptio...

No.  An Eligible Employer may not receive the Employee Retention Credit if the Eligible Employer receives a Small Business Interruption Loan under the Paycheck Protection Program that is authorized under the CARES Act (“Paycheck Protection Loan”). An Eligible Employer that receives a paycheck protection loan should not claim Employee Retention Credits."

"For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. Because this credit can apply to wages already paid after March 12, 2020, many struggling employers can get access to this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19."

"Impact of other credit and relief provisions

An eligible employer's ability to claim the Employee Retention Credit is impacted by other credit and relief provisions as follows:

• If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program, authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit.
• Wages for this credit do not include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act.
• Wages counted for this credit can't be counted for the credit for paid family and medical leave under section 45S of the Internal Revenue Code.
• Employees are not counted for this credit if the employer is allowed a Work Opportunity Tax Credit under section 51 of the Internal Revenue Code for the employee."

And:

"In anticipation of claiming the credit, employers can retain a corresponding amount of the employment taxes that otherwise would have been deposited, including federal income tax withholding, the employees' share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes for all employees, up to the amount of the credit, without penalty, taking into account any reduction for deposits in anticipation of the paid sick and family leave credit provided in the Families First Coronavirus Response Act (PDF). 

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200."

Hope that helps. All of this is meant to be Easy to read to find out what you specifically need to research further. I am not making any comprehensive information available here, since it likely won't stay timely to updates.

[BobKamman]

Now I'm wondering about that deferral of FICA taxes.  My first reading of CARES Act was that it applied only to paychecks after March 27.  Now, what I see is that it applies to "payments and deposits" due after March 27 -- which would include the entire first quarter, for employers with payrolls below the minimum deposit requirements.  Does anyone else read it that way?

[qbteachmt]

The very first text I read stated it was based on Liability Deposit Due Date, not Paycheck date. Or, as I teach it in my Payroll Class:

Liability Period starts with the paycheck date, because that's when money happened.

Liability Due Date is based on your payment cycle per the IRS. Which can be Monthly, Quarterly, or Accelerated as next date or 3-banking dates.

If you find more specific or even more current info, please post it in the topic where I put a bunch of links already. It's nice when it is all in one place.

[hillsboro15269]

This is so helpful. Thank you! Wish we could get CPEs for all this self-study we're doing this year!

[qbteachmt]

It helps if you take One Thing at a time.

A Healthy Business wants to defer FICA payments to maintain cash through the crisis = the Employer Share of SS that falls in the guideline of the Enactment date is 50% end of 2020 and 50% end of 2021. That's All you need to think about for this one.

An employer that wants to take advantage of the Retention Credit can either apply for it, or keep some of the employee withholdings, as an Advance against their being entitled for that credit. This is the Form 7200 thing. That's all there is to this one.

And then it gets intertwined with Loans and forgivable provisions, and Business qualification offerings, etc. But they start to be beyond the simple question of "when do we send in the money?"

941 Form News:

https://home.kpmg/us/en/home/insights/2020/04/tnf-irs-form-941-address-employee-retention-credit.htm...

[qbteachmt]

I found the 941 revision Form and Instructions; I put the links here:

https://proconnect.intuit.com/community/coronavirus/discussion/re-starting-the-list-do-your-own-rese...