When the original Form 941 was filed, the employer's 6.2 percent share of Social Security taxes was paid; the entire ERC is fully refundable if Form 941-X is used. The Employee Retention Credit (ERC) is requested by submitting an eligible wage on line 30 of Form 941-X. Adjustments to qualified health plan expenses attributable to the employee retention credit are listed on Form 941-X, line 31a. You cannot use any credit shown on another Form 941-X to pay the amount you owe, even if you filed the request for the amount due and the credit at the same time.
If you overreported taxes on Form 941 and chose to apply the credit to Form 941 or Form 944, file an adjusted return on Form 941-X shortly after discovering the error, but more than 90 days before the statute of limitations for the credit or refund on Form 941 expires. If you're wondering how to apply for the 941 X Employee Retention Credit, you've come to the right place. The IRS is now processing millions of payroll tax returns due to changes in COVID-19 safety regulations and the high volume of requests for reimbursement of the employee retention credit (ERC). The American Rescue Plan (ARP) changed the way in which the employee retention credit on Form 941 should be applied.
If you applied for the COBRA premium assistance credit and make any corrections to Form 941-X to the amounts used to calculate this credit, you will need to recalculate the amount of this credit using worksheet 5.Any salary that could be considered to qualify for the employee retention credit or PPP loan forgiveness can be applied to either of these two programs, but not to both. The IRS has issued an initial draft of Form 941-X, the employer's adjusted financial statements, the federal tax form or refund requests, and the guidelines for Form 941-X, in preparation for the changes caused by the employee retention credit. The employee retention credit under the CARES Act encourages companies to keep their employees on the payroll. Refund or reimburse your employees for overcollecting Social Security and Medicare taxes from employees, or.
So, since we previously filed Form 941, how can you apply for the employee retention credit and submit the necessary documents to the IRS? You'll need to modify your 941 or complete Form 941-X. You will also use this spreadsheet to calculate this credit if you apply for the credit for the first time on Form 941-X. Section 3509 establishes special rates for employee participation in federal income tax, social security tax, Medicare tax, and additional Medicare tax withholding when workers are reclassified as employees under certain circumstances. An eligible employer can apply for the employee retention credit on any qualifying salary that is not counted as a payroll cost to obtain PPP loan forgiveness.
This practical step-by-step guide is designed to help you understand and file your payroll tax refund from the 941-X Employee Withholding Tax Credit.