24 September 2020

Draft Form 941, Employer’s Quarterly Federal Tax Return (revised July 2020)

The IRS has issued a draft version of the 2020 Form 941 (Employer’s Quarterly Federal Tax Return), to be used for the third and fourth calendar quarters of 2020, that has a line to show the deferred amount of the employee share of Social Security taxes.

Background—Form 941. Every person who

  1. Withholds income tax from wages or
  2. Pays wages subject to FICA tax, must file Form 941, Employer’s Quarterly Federal Tax Return, for the first calendar quarter in which he meets either (1) or (2), above, and for each subsequent calendar quarter, whether or not wages are paid in those quarters, until the person has filed a final return. (Reg § 31.6011(a)-1(a)(1); Reg § 31.6011(a)-4(a)(1))

Background—deferred Social Security taxes. Section 2302 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) allows employers to defer depositing the employer’s share of Social Security taxes.

Form 941 was revised in May, adding line 13b,”Deferred amount of the employer share of social security tax.” See New draft version of allocation schedule for aggregate Form 941 filers released, Federal Tax Update (05/12/2020).

Line 24 was used on that form to report “Qualified wages paid March 13 through March 31, 2020, for the employee retention credit.”

On August 8, 2020, the President, via a Presidential Memorandum, directed the Secretary of the Treasury to use his authority pursuant to Code Sec. 7508A, in light of the COVID-19 emergency, to defer the withholding, deposit, and payment of the employee share of Social Security payroll tax obligations. The IRS has subsequently issued guidance regarding this. See IRS issues payroll tax deferral guidance, Federal Tax Update (09/01/2020).

Form 941 updated. The IRS has released a draft of Form 941 to be used in the third and fourth quarter of 2020.

The caption to line 13b has been changed to “Deferred amount of social security tax.”

Line 24 has been recaptioned “Deferred amount of the employee share of social security tax that is included in line 13b.”

In a recent IRS payroll industry call, the IRS indicated that the deferred employee tax and deferred employer’s share of Social Security will both be reported on line 13b. The deferred employee tax is broken out on line 24. See Call on employee payroll tax deferral leaves some questions unanswered.