The outbreak of COVID-19 has already made irreversible changes to the way we live, work, and interact. In the workplace, the various stimulus packages, sick leave provisions, and other economic and governmental programs brought about by the pandemic have created a need for additional documentation and disclosures on certain payroll tax filings and forms. Two of the forms impacted by COVID-related changes are Form 941 (Employer’s Quarterly Tax Return), beginning with 2nd Quarter 2020, and the 2020 Form W2.

Our HR and payroll experts have gathered the resources you’ll need to ensure compliance and proper documentation based on IRS guidance – read about the updates and access the additional resources below.

Significant changes have been made to Employer’s Quarterly Federal Tax Return Form 941 to allow for the reporting of new employment tax credits and other tax relief related to COVID-19.

Read a summary of the changes below and visit the IRS website for instructions and to access the form.

  • 1st Quarter 2020 Form 941 should only be used to report wages for the first quarter of 2020 and should NOT be used for any other 2020 quarterly payroll tax filings

  • The updated Form 941 Instructions include a new Worksheet 1. This worksheet compiles the necessary COVID-19 related credit information and calculates the applicable eligible amounts and credits required to complete the Form 941. Worksheet 1 is not required to be submitted to the IRS but should be retained with the quarterly filing records.

  • The updated Form 941 reflects and accounts for all applicable FFCRA paid leave and Employee Retention credits as well as any employer elected payroll tax deferrals.

  • All advance payroll tax credits, whether claimed via a direct credit to current Federal payroll tax liabilities or claimed by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, are accounted for within the new Form 941.

With the onset of COVID-19 came the Families First Coronavirus Response Act (FFCRA) which includes new requirements for public and private employers with less than 500 employees to provide paid emergency sick leave and family leave to their employees for coronavirus-related reasons.

The FFCRA and sick leave provisions, we now know, will require additional disclosures on the Form W2 which employers will need to take into account as they prepare for year-end filing.

According to the IRS, employers must separately disclose qualified sick leave wages pursuant in the Emergency Paid Sick Leave Act (EPSLA) as well as any qualified family leave wages pursuant to the Emergency Family and Medical Leave Expansion Act (EFMLEA). This is particularly important for self-employed individuals who also receive wages from an employer as this will allow them to properly claim any qualified sick leave under the FFCRA.

According to the IRS, the Form W2 reporting changes were necessary to ensure that self-employed individuals who also receive W2 wages are provided all of the necessary payroll information to apply for the FFCRA credits that they are entitled to. As a result, all employers are required to report the amount, itemized by leave type, of any FFCRA leave wages paid out to each employee with his or her 2020 Form W2 The possible FFCRA leave types that must be reported separately include:

  • Emergency Sick Leave – total amount of qualified sick leave wages paid pursuant to paragraphs 1), (2), or (3) of section 5102(a) of the EPSLA; and

  • Emergency Family Leave – total amount of qualified sick leave wages paid pursuant to paragraphs (4), (5), and (6) of section 5102(a) of the EPSLA; and

  • Extended FMLA Leave – total among of qualified family leave wages paid pursuant to section 3102(b) of the EFMLEA.

Employers are required to report this information with the 2020 Form W2 in one of the following ways:

  • Reported in Box 14 of the 2020 Form W2.

  • On a separate statement provided to all employees with the 2020 Form W2. The IRS has provided suggested language for this statement within Notice 2020-54.

Have questions about the recent guidance surrounding the Form 941or Form W2? The AEM Workforce Solutions team can help to walk you through these important regulations and ensure that your organization is successfully completing your filings amidst these challenging circumstances.

Reach out to a Workforce Solutions team member today to find confidence in your understanding and execution of the new form guidelines.

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