Nearly 18 months into the pandemic, the IRS continues to issue guidance on the employee retention credit, a credit that was adopted in March 2020 and has been addressed in a number of articles on the Tax Withholding & Reporting Blog, most recently on August 3, 2021. Generally, your correction of an underreported tax amount wont be subject to an FTP penalty, FTD penalty, or interest if you: File on time (by the due date of Form 941 for the quarter in which you discover the error). For more information about the payroll tax credit, go to, For prior years, you may only correct administrative errors to federal income tax withholding (that is, errors in which the amount reported on Form 941, line 3, isn't the amount you actually withheld from an employees wages) and errors for which section 3509 rates apply. See section 13 of Pub. If you obtained written statements or consents from some employees but you couldnt locate employees or secure the statements or consents of the remaining employees, check all applicable boxes. Report any subsequent dates and related errors on line 43. . . Eight Tips to Amend Form 941 for the ERC 1. Complete the company information on each page, the "Return You're Correcting" information in the upper right corner and enter the date you discovered the errors. In March 2022, you discovered that you erroneously reported $3,000 of qualified family leave wages on Form 941 for the second quarter. For purposes of this credit, qualified sick leave wages and qualified family leave wages are wages for social security and Medicare tax purposes, determined without regard to the exclusions from the definition of employment under sections 3121(b)(1)(22), that an employer pays that otherwise meet the requirements of the EPSLA or Expanded FMLA, as enacted under the FFCRA and amended for purposes of the ARP. Errors discovered in the same calendar year or prior year administrative errors. Number of Individuals Provided COBRA Premium Assistance, 1922. Qualified Small Business Payroll Tax Credit for Increasing Research Activities, 17. Qualified Health Plan Expenses for the Employee Retention Credit, 32. Credit From Form 5884C, Line 11, for This Quarter, 33a. If the amount on line 27 is a positive number, you must pay the amount you owe by the time you file Form 941-X. You had three employees. You also cant file Form 941-X to reduce wages because the wages were income to Jack for the prior year. In the box at the top of page 1, check the type of return (Form 941 or Form 941-SS) youre correcting. 15 for more information about corrections during the calendar year and about administrative errors. An official website of the United States Government. Form 8974 is used to determine the amount of the credit that can be used in the current quarter. You discover both errors on March 14, 2022. If you checked the box on Form 941-X, line 4b or line 5c, because youre correcting only the employer share of tax on a decrease to Medicare wages and tips, use 0.0145 (1.45%) when multiplying the amount in column 3. ExampleQualified family leave wages decreased. If you need more space, attach additional sheets, but be sure to write your name, EIN, Form 941-X, the quarter youre correcting (for example, Quarter 2), and the calendar year of the quarter youre correcting on the top of each sheet. In column 2, enter the amount you originally reported or as previously corrected. To amend Form 940 in QuickBooks Desktop: Go toEmployees, select Payroll Tax Forms & W-2s. If we receive Form 941-X after the due date, we will treat Form 941-X as filed on time if the envelope containing Form 941-X is properly addressed, contains sufficient postage, and is postmarked by the U.S. This credit is claimed on Form 5884-D. Form 5884-D is filed after the Form 941 for the quarter for which the credit is being claimed has been filed. This is what is happening with the Employee Retention Tax Credit (ERTC). You must use the U.S. Or you can send your comments to: Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. You must also report that $20,000 of the amount shown in column 3 was related to the correction of a prior year nonadministrative error and $27,000 of the amount shown in column 3 was related to the correction of an administrative error. Use line 15 to correct any adjustments reported on Form 941, lines 79. One-half of the deferred amount of the employer share of social security tax was due by December 31, 2021, and the remainder is due by December 31, 2022. Partnership (including an LLC treated as a partnership) or unincorporated organizationA responsible and duly authorized member, partner, or officer having knowledge of its affairs. For more information about the credit for qualified sick and family leave wages, go to IRS.gov/PLC. It is not a loan, and no repayment is required. 316, available at IRS.gov/irb/2021-34_IRB#NOT-2021-49; and Rev. .Premium payees that receive an election from an assistance eligible individual are entitled to the COBRA premium assistance credit for premiums not paid during the quarter in which the election is received. If a prior year error was a nonadministrative error, you may correct only the wages and tips subject to Additional Medicare Tax withholding that were originally reported on Form 941, line 5d, column 1, or previously corrected on Form 941-X. The employee retention credit enacted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and amended and extended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was limited to qualified wages paid after March 12, 2020, and before July 1, 2021. See Is There a Deadline for Filing Form 941-X? Copy the amount in column 3 to column 4. .The quarterly amount on line 6, column 1, should be used to figure the annual amount to report on your Forms W-2 or Forms W-2c. 80 for more information on legal holidays. They did offer a revised copy of the Q4 941 that would have allowed you to claim the credit on your initial filing, but it was only available for a short window before the due date, and many had already submitted their standard Q4 941. See ExampleYou want your overreported tax applied as a credit to Form 941, earlier. Generally, all employment tax records must be kept for at least 4 years. You filed your 2019 fourth quarter Form 941 on January 28, 2020, and payments were timely made. Adjusted Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2020, and Before April 1, 2021, Worksheet 2. Keep them for your records. If youre correcting the refundable portion of the credit for qualified sick and family leave wages for leave taken after March 31, 2021, and before October 1, 2021, that you reported on Form 941, line 13e, enter the total corrected amount from Worksheet 3, Step 2, line 2s, in column 1. However, you cant file a Form 941-X to correct the wrong amount of Additional Medicare Tax actually withheld from an employee in a prior year, including any amount you paid on behalf of your employee rather than deducting it from the employees pay (which resulted in additional wages subject to tax). Overview Small Business Payroll (1-49 Employees) Midsized to Enterprise Payroll (50-1,000+ Employees) Compare Packages Find the package that's right for your business. For more information on COBRA premium assistance payments and the credit, see Notice 2021-31, 2021-23 I.R.B. If you didnt file a Form 941 for one or more quarters, dont use Form 941-X. If your Form 941 for the second, third, or fourth quarter of 2020 didn't claim the correct amount of the credit for qualified sick and family leave wages because you paid qualified sick leave wages and/or qualified family leave wages that meet an exclusion under sections 3121(b)(1)(22), you may file Form 941-X and complete Worksheet 1 to claim the correct amount of the credit. How to Fill Out 941-X for Employee Retention Credit? The employee retention credit enacted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and amended and extended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was limited to qualified wages paid after March 12, 2020, and before July 1, 2021. Following ExampleWages, tips, and other compensation decreased in the instructions for line 6, the wages that you counted twice were also taxable social security wages. To become a CPEO, the organization must apply through the IRS Online Registration System at IRS.gov/CPEO. Generally, youre not required to complete this section if youre filing the return as a reporting agent and have a valid Form 8655 on file with the IRS. Attorney Employee Retention Tax Credit Refunds for Law Firms If Form 941-X is filed late (after the due date of the return for the return period in which you discovered the error), you must attach an amended Schedule B (Form 941) to Form 941-X. You may need to attach Schedule R (Form 941) to your Form 941-X. You were required to withhold $400 of federal income tax from an employee's bonus that was paid in December of 2021 but you withheld nothing. 82, at IRS.gov/irb/2005-28_IRB#RP-2005-39. On July 1, 2022, you discover an error that results in additional tax on your 2021 third quarter Form 941. See Is There a Deadline for Filing Form 941-X, earlier. On July 1, 2022, you discover that you underreported $10,000 of social security and Medicare wages on your 2022 first quarter Form 941. Be sure to explain your calculations on line 43. Following ExampleQualified sick leave wages increased in the instructions for line 9, you originally reported a $1,000 nonrefundable portion of the credit for qualified sick and family leave wages on Form 941, line 11b, for the second quarter of 2020. On the second sheet, Line 18a, enter your non-refundable sum or ERC . For those who In column 2, enter the amount you originally reported or as previously corrected. Postal Service on or before the due date, or sent by an IRS-designated private delivery service (PDS) on or before the due date. Check the box on line 41 if any corrections you entered on lines 726c, or lines 2831a, or lines 3240, column 3, reflect both underreported and overreported amounts. The deferred amount of the employee share of social security tax was only available for social security wages of less than $4,000 paid to an employee in any biweekly pay period (or the equivalent threshold amount for other pay periods) paid on a pay date during the period beginning on September 1, 2020, and ending on December 31, 2020. To correct the error, figure the difference on Form 941X as shown. If you completed Worksheet 3 or Worksheet 4, enter the amount listed on Worksheet 3, line 1f, or Worksheet 4, line 1a or 1g (as applicable). If the amount in column 3 used a minus sign, also use a minus sign in column 4. If you filed the required information returns for some employees but didnt file them for other employees, be sure to use the applicable rates for each employee when calculating the amounts in column 4 and show your calculations on line 43. For an example of how to report amounts in columns 14 for an employment tax credit, see the instructions for line 17, earlier. The latest guidance takes the form of Notice 2021-49 and Revenue Procedure 2021 . Step-by-Step How to Guide to Filing Your 941-X ERTC First is "Adjusted employment tax return". In column 3, enter the difference between columns 1 and 2. You can use the following procedure for filling out the Form 941-X for claiming ERC for future claims: 1. The amounts entered on lines 2831a and lines 3240 are amounts that you use in Worksheets 15, as applicable, to figure your credits. These lines dont have an entry space for column 4 because these adjustments dont directly result in an increase or decrease to your tax. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020, contains over $2 trillion for economic stimulus, including cash payments to individuals, expanded unemployment benefits, retirement distributions, payroll tax deferrals and tax credits, corporate relief, and economic support for the If youre correcting the qualified wages paid March 13, 2020, through March 31, 2020, for the employee retention credit that you reported on Form 941, line 24, for the second quarter of 2020, enter the total corrected amount for all employees in column 1. The time needed to complete and file Form 941-X will vary depending on individual circumstances. The revenue procedure also contains guidance concerning when an employer may claim a refund of only the employer share of overcollected social security tax and Medicare tax. If you work for a firm, enter the firm's name and the EIN of the firm. Use line 32 only for corrections to quarters beginning after March 31, 2020, and before April 1, 2021. You can help the IRS process Form 941-X timely and accurately if you follow these guidelines. The 941-X is the means to net the refund after the fact. Here is how you would enter the numbers on Form 941X, line 17. You withheld $270 ($30,000 x 0.009) from Xavier's wages. The portion of the credit used against the employer share of social security tax is allowed in the first calendar quarter beginning after the date that the qualified small business filed its income tax return. File Form 941-X and pay the amount you owe by October 31, 2022, because you discovered the error in the third quarter of 2022, and October 31, 2022, is the due date for that quarter. Credit for COBRA premium assistance payments is limited to periods of coverage beginning on or after April 1, 2021, through periods of coverage beginning on or before September 30, 2021. Enter the corrected amount from column 1 on Worksheet 3, Step 2, line 2h. Proc. 2005-39. Enter the corrected amount from column 1 on Worksheet 1, Step 2, line 2b.