IRS Releases Final Version of Form 941-X Related to COVID-19 Relief

• Find out more about the employee deferral of Social Security taxes that President Trump approved earlier this year.
• Learn about the many corrections and final instructions on the new Form-941-X.

In response to the COVID-19 pandemic, the federal government enacted legislation that includes deferral of the employer’s portion of Social Security tax. The IRS then significantly revised Form 941-X, “Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.” This form allows for adjustments and corrections to COVID-19 tax relief on previously filed Forms 941.

The IRS recently released the final version of October 2020 instructions for Form 941-X. This form accounts for adjusting amounts previously reported as the deferred employee’s share of Social Security tax. Fiducial explains the changes you need to know about below.

Employee deferral

On August 8, 2020, as a form of COVID-19 tax relief, President Trump signed an executive memorandum allowing employers to opt to defer the employee’s portion of Social Security tax. This applied to employees who earn less than $4,000 biweekly or its equivalent under other pay frequencies from September 1, 2020, through December 31, 2020.

Later that month, the IRS released Notice 2020-65. This notice postpones the withholding and remittance of the employee share of Social Security tax ratably between Jan. 1, 2021, and April 30, 2021. Penalties, interest and additions to tax will begin to accrue on May 1, 2021, for any unpaid taxes. The Notice states that, if necessary, the employer may arrange to collect the total applicable taxes from the employee. The postponement of the withholding and remittance of the employee’s share of Social Security tax is optional for the employer.

Form 941-X final instructions

The final instructions are labeled “(Rev. October 2020).” The October 2020 Form 941-X has been revised to allow for correcting the deferred amount of the employee share of Social Security tax on wages paid on or after September 1, 2020, and before January 1, 2021.

Use Form 941-X, line 24 to correct the deferral of the employer and employee share of Social Security tax. It applies to the third and fourth quarters of 2020. For 2020’s second quarter, you may use Form 941-X, line 24 to correct only the deferral of the employer share of Social Security tax.

The corrected Form 941-X has renumbered line 33 to line 33a. The new line 33b will correct the portion of the deferred amount of the employee share of Social Security tax. This correction applies to the third and fourth quarters of 2020 included on Form 941, line 13b.

Employers may correct only the deferred employee share of Social Security tax if the amount originally reported on Form 941, line 13b did not equal the amount actually deferred. You may not defer the amount if the correct amount of the employee’s share of Social Security tax was already paid. In other words, an employer may not retroactively defer the employee’s share of Social Security tax by filing Form 941-X.

File carefully

If your organization deferred the employee’s portion of Social Security tax under the conditions of the COVID-19 relief offered, review the filing requirements carefully. Need help filing this form? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations.

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For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.