A software update is now available that includes the new Federal Form 941. Even if you don’t have Covid-19 wage credits, you must use the new form when filing. To download and install the update, go to Tools > Check for Updates.
As with other program updates, if you have multiple users, all users must be out of the program when installing the update. We recommend running the update and opening each of your companies from the server to complete the data file updates.
Below is additional information on the Covid-19 wage credits and a link to new instructions on completing the new Federal Form 941.
Background Information
Shortly after the Covid-19 wage tax credits were passed by Congress, Datatech provided a method to set up wage types to track wages paid that could be taken as a credit.
The procedures recommended would allow you to track these wage tax credits.
However, the software does not
- Determine the eligibility of employees to receive these credits,
- Nor does it track any limits on wages paid using the Covid-19 wage type.
If there are limits on the rate of pay, weekly totals, or number of hours, you must observe those limits when categorizing the wages under the Covid-19 wage type.
- Line 5a (i), Qualified Sick Leave Wages
- Line 5a (ii), Qualified Family Leave Wages
Best Practice
The new 941 form also provides for taking credits for wages paid under the Employee Retention Credit provisions. The program does not track these wages, but if you have paid wages under this provision, and you have used a wage type specifically set up for it, you can get a report of those wages using the Labor Analysis Report.
Nonrefundable vs. Refundable Credits
Any credits up to the amount of the Employer Social Security tax portion will be counted as a Nonrefundable credit. This amount will be applied to the Total Amount of Taxes Due.
Any credits due over the amount of Employer Social Security will be applied as credits/payments to the Total Taxes Due.
We will discuss this in the instructions below.
Completing Form 941
The new 941 form is more complicated due to the breakdown of the Covid-19 wages as well as the tax credits you need to calculate. We have provided all of the entries needed for the form, but we cannot provide advice on how to fill it out. The IRS has a publication to assist you with this. That publication provides a worksheet for calculating the wage credits, which include the wages paid, any prorated health insurance benefits you paid, and the Medicare tax.
In order to determine the qualified wages, the program must know what wage types you have used for the Qualified Sick Leave and Qualified Family Leave. The program uses the information in the Paid Leave Type Setup. If you have not defined the Wage Codes and/or Jobs used for Covid-19 wages in that table, click here for instructions on completing that set up before continuing the Federal Form 941.
If you have not set up any wage types for the leave wages paid, the program cannot calculate the total wages. You will need to do this yourself, and then edit the 941 form lines 5a (i) and 5a (ii) to adjust the totals.
What the program does:
If you have used specific wage types for the Covid-19 leave payments, the program will calculate these totals for lines 5a (i) and 5a (ii). They are listed separately from other social security wages on these lines because they are not subject to the employer portion of social security.
What the program does not do:
You must take the total Covid-19 leave wages on lines 5a (i) and 5a (ii), and transfer to Worksheet 1. They will be combined with the employer portion of Medicare (calculated on the worksheet) and the employer’s portion of any health insurance benefits for the time the employees were on leave (you must calculate the health insurance credit).
You will then take the total of the non-refundable credits and enter that total on line 11b of the 941, and any refundable credits on line 13c.
Questions
If you need assistance with the worksheet, please contact your accountant. Datatech support personnel cannot assist with this worksheet, or any other data that is required on Form 941 that you need to compile separately.
If you have any questions about what wages are allowed for the Covid-19 leave or the employee retention credit, please consult the IRS web site for more details, or contact your accountant. We cannot provide accounting or legal advice.
Download Instructions
Download the complete instructions for filling out Form 941 in Datatech’s Software. You can also find these instructions in your software Help files.