Using Form 941 For FFCRA Tax Credits

January 14, 2021

By Laura Melville, Manager, Outsourced Payroll

This guide is to be a helpful resource to guide you through how to properly prepare your 4th quarter Form 941 should you have any paid sick or family leave wages under the Families First Coronavirus Response Act for which you are claiming refundable tax credits.

For further information on the details of this Act, read this blog.

Earlier this year, the IRS had updated Form 941 to allow employers to report wages paid under this Act. Be sure you’re using the July 2020 revision for 4th quarter reporting. This is noted in the upper left-hand corner of Form 941, directly under the title. Paid sick and family leave wages will need to be reported on separate lines. Companies looking to take these credits should make sure to also prepare Worksheet 1. Although this worksheet is optional, it was created by the IRS to help companies properly complete the calculations of the credits.

Sick Leave And Family Leave Wages – FFCRA – 941 Input

Be sure to include the correct information on the following lines:
• 5a enter taxable social security wages, no qualified sick or family leave wages
• 5a(i) enter only qualified sick leave wages
• 5a(ii) enter only qualified family leave wages
• 5c enter taxable Medicare wages and tips
• 19 enter qualified health plan expenses allocable to sick leave wages
• 20 enter qualified health plan expenses allocable to qualified family leave wages

How To Calculate The Credit

Credit is equal to qualified sick and family leave wages, qualified health plan expenses allocable to those wages, plus employer portion of Medicare on those wages (1.45%).

Use Worksheet 1 of Form 941 to calculate the sick and family leave credit using the information described above. The credit for qualified sick and family leave wages is reported on line 11b, and if applicable line 13c

How To Avoid Common Errors

Be sure “Total Liability for the quarter” on Schedule B or in Part 2 Line 16 equal line 12. If they don’t, some software have been forcing the difference on to Line 7. To avoid this, monthly and semiweekly schedule depositors must account for nonrefundable credits claimed on 11a, 11b, and 11c when reporting their tax liabilities on line 16 in Part 2 or Schedule B.
Be sure your software is up to date with any new earning codes for the sick wages and family leave wages – this will help the software calculate the credits for you.