IRS’ latest revision of Form 941: What’s changed for Payroll

There’s a new version of Form 941 for the second quarter of 2021 with some significant changes your Payroll pros will need to know about. 

The most recent version of the form was revised in June 2021. Most of the updates are to allow employers to claim new COVID-19 tax credits established by the American Rescue Plan Act (ARPA).

Here’s a rundown of the changes you can pass along to your team.

Important Form 941 updates

For starters, this quarter’s Form 941 has several more worksheets included with it than usual. There are five different worksheets for employers to calculate all the tax credits available. Worksheets 1 and 3 are used for COVID-19 qualified paid family and sick leave wages.

Worksheets 2 and 4 are used for the employee retention credit. Employers use Worksheet 5 for the credit for COBRA premium assistance payments.

There are also several new lines on Form 941 to account for all these credits. Qualified family and sick leave wages paid after March 31, 2021, should be reported on line 5a. The credit for leave taken after this date is reported on line 11d for the nonrefundable portion. If there’s a refundable portion, it’s reported on line 13e.

Payroll will still use line 11c to report the nonrefundable portion of the employee retention credit. The refundable portion is reported on line 13d. With the COBRA premium assistance credit, use line 11e to report the nonrefundable portion of the credit and line 13f to report the refundable portion of the credit. You also need to report the number of people who received assistance on line 11f.

In the instructions for this quarter’s Form 941, the IRS emphasized that employers can’t use an earlier revision of the form to report this year’s taxes.

Even if your company isn’t claiming any of the ARPA tax credits this year, Payroll will still have to use the most recent version of the form. The March 2021 revision can only be used to report taxes for the first quarter of 2021.

The IRS anticipates that the June 2021 revision won’t change for the rest of the year. But any last-minute updates to the law may require the agency to update the form.