IRS revises Form 941-X to report new tax credits: What Payroll needs to know

If your company needs to file an amended Form 941-X to claim any new tax credits or correct a quarterly return, heads up: The IRS has released a new draft version of the form. 

Here’s a preview of the most important changes for your Payroll pros once the agency finalizes the new form.

Line-by-line updates of Form 941-X

In the draft Form 941-X, Payroll can use lines 9 and 10 to report any qualified sick leave wages and qualified family leave wages, respectively, paid after March 31, 2020, for leave taken before April 1, 2021.

Payroll will now use line 17 to report the nonrefundable portion of the credit for qualified sick and family leave wages for any leave employees took before April 1, 2021.

Also, the IRS has broken line 18 of Form 941-X into four parts:

• 18a, nonrefundable portion of the employee retention credit
• 18b, nonrefundable portion of the credit for qualified sick and family leave wages for leave taken after March 31, 2021
• 18c, nonrefundable portion of the COBRA premium assistance credit, and
• 18d, number of individuals who were provided COBRA premium assistance.

To report the refundable portion of the credit for any qualified sick and family leave wages taken before April 1, 2021, Payroll will use line 25.

Line 26 now has three parts. Payroll will use line 26a to report the nonrefundable portion of the employee retention credit. And they’ll use Line 26b for the refundable portion of the credit for qualified sick and family leave wages for leave taken after March 31, 2021. Report the refundable portion of the COBRA premium assistance credit on line 26c.

On lines 28 and 29, Payroll will report qualified health plan expenses allocated to qualified sick leave wages and qualified family leave wages. This is for leave employees took before April 1, 2021. Lines 35-40 are only applicable to quarters beginning after March 31, 2021. They deal with qualified leave taken after that date.

These changes align with the IRS’ most recent revision of Form 941.