Draft employer’s payroll tax return incorporates ARPA changes

By Paul Bonner

The IRS on Tuesday released a draft revised 2021 version of Form 941, Employer’s Quarterly Federal Tax Return, reflecting further new and updated payroll tax credits.

The current official version was released less than three months earlier on March 9, and the impending further changes reflect Congress’s multiple provisions of temporary payroll tax relief to aid businesses’ operations during the lingering effects of the COVID-19 pandemic.

The form accompanies employers’ quarterly remittances of employees’ federal income tax, Social Security tax, and Medicare tax withheld from employees’ wages, along with employers’ liability for their share of Social Security and Medicare taxes due on those wages. The Form 941 for the current calendar quarter (ending June 30) is due July 31.

The latest draft revisions mostly incorporate provisions of the American Rescue Plan Act (ARPA), P.L. 117-2, enacted March 11. For example, ARPA provided a temporary 100% subsidy for premiums for COBRA continuation coverage, to be paid by employers or other taxpayers to whom eligible individuals would otherwise pay the premiums. That aid is in turn reimbursable by a refundable credit against the employer’s portion of Medicare tax. The draft Form 941 accordingly contains new lines for employers to enter nonrefundable and refundable portions of the COBRA premium assistance credit (lines 11e and 13f, respectively), as well as the number of persons provided COBRA premium assistance (line 11f).

Some existing lines are revised with cutoff dates to demarcate pre- and post-ARPA changes in credits for qualified sick and family leave wages, and qualified health plan expenses allocable to those wages, originally enacted by the Families First Coronavirus Response Act (FFCRA), P.L. 116-127, and extended, with modifications, by ARPA through Sept. 30, 2021.

A new checkbox is available (line 18b) for an employer eligible for the employee retention credit solely because it is a “recovery startup business.” Section 9651 of ARPA added this provision as Sec. 3134(b)(1)(B), for certain smaller employers that began operations after Feb. 15, 2020, that partially or fully shut down due to a significant decline in gross receipts or because of a governmental order.

To comment on the draft revisions, visit irs.gov/formscomments.

Paul Bonner (Paul.Bonner@aicpa-cima.com) is a Tax Adviser senior editor.

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