Are you looking to claim the Employee Retention Tax Credit (ERTC aka ERC) and need guidance on how to File 941X for ERTC? In this article, we’ll walk you through the steps of filling out and submitting Form 941-X.
We’ll cover everything from gathering necessary documents to completing personal information, choosing the correct process for amending your return, and completing the certifications.
Plus, we’ll address FAQs about Form 941-X and provide important deadlines and considerations to keep in mind.
We would recommend using an ERC tax expert to help you work through the process. Clicking on the image below takes you to our recommended ERC tax expert. Go through the questions which are aimed at quickly finding out if you qualify for ERC or not, not everyone is eligible.
What is Form 941-X for ERC?
Form 941-X is the necessary form for claiming the Employee Retention Credit (ERC aka ERTC) for qualified businesses affected by the COVID-19 pandemic. If you missed out on the ERC in the first two quarters of 2021, you can still file a Form 941-X to take advantage of it.
The nonrefundable element of the ERC matches your employer’s contribution of Social Security tax, or 6.4% of salaries, on Form 941-X for the first and second quarters of 2021.
When it comes to filling out 941-X for ERC, there are some important steps to follow. First, gather all your important documents and personal information before starting. Then, fill out your personal information and enter the corrected return information. Make sure to choose Option #2 for claiming the ERC retroactively.
It’s crucial to complete all certifications required for Form 941-X accurately. Keep in mind that deadlines for filing Form 941-X for ERC claims are April 15, 2024, for 2020 and April 15, 2025, for 2021. To avoid additional waiting time for your refund check, file Form 941-X as soon as possible.
The processing times for both Form 941-X and refund checks may take four to twelve months or longer due to increased claims and staff shortages at IRS processing centers.
Remember that using Form 7200 is no longer accepted for ERC claims; instead, use Form 941-X. Additionally, consult with your payroll provider before filing Form 941-X.
Overall, understanding how to properly fill out and file Form 941-X is essential for claiming the Employee Retention Credit.
Can I File 941-X for Employee Retention Credit?
To claim the Employee Retention Credit, you can use Form 941-X to make necessary adjustments and obtain the associated benefits. Here are some important steps to follow when filing Form 941-X for the Employee Retention Credit:
- Gather important documents and personal information, including your previous Form 941 and payroll logs.
- Fill out your personal information on the form, such as your EIN number, company name, and quarter/year.
- Choose the appropriate options on the form, indicating whether you are filing an updated tax return or a claim.
- Enter the non-refundable sum of the ERC on Line 18a of Form 941-X.
- Calculate and enter the refundable share of the ERC on the subsequent page.
Filing Form 941-X allows you to retroactively claim the Employee Retention Credit if you have already filed your tax return for 2020. It is important to note that Form 7200 is no longer accepted for ERC claims; instead, use Form 941-X.
When reporting qualified wages and health plan expenses on Form 941-X, be sure to provide accurate information. Report qualified wages on Line 30 and qualified health plan expenses on Line 31. Multiply the sum of these lines by the credit percentage.
In order to accurately describe over reported amounts, use Line 37 on Form 941-X. Provide detailed explanations including line numbers, error date, amount, and cause. It is crucial to accurately explain your eligibility for the credit.
Remember to file Form 941-X within three years of filing Form 941 or two years from tax payment. We suggest you consult with an ERC Tax expert before filing this form. Additionally, retain worksheets used to calculate both nonrefundable and refundable portions of the ERC.
Form 941-X Instructions to Claim the ERTC
To fill out Form 941-X for the Employee Retention Credit (ERC), follow these steps:
- Start by filling out your contact details, including your employer identification number, business name, trade name, and address.
- Note the type of return and filing period by choosing Form 941 and specifying the quarter and year.
- Check the claim box to indicate if you underreported tax amounts.
- Complete the certification section to certify that the information provided is true and accurate.
- Finally, enter the numbers into Part 3 of Form 941-X where you will calculate and report the qualified wages and health plan expenses for claiming the ERC.
Fill Out Your Contact Details
The top section of Form 941-X requires you to provide your employer identification number, business name, trade name, and address. This information is crucial for ensuring that your credit gets applied to the correct account and helps with processing the form accurately.
To fill out this section correctly, follow these steps:
- Start by entering your employer identification number (EIN), which is a unique nine-digit number assigned by the IRS.
- Next, write down your business name exactly as it appears on official documents.
- If you have a trade name or DBA (Doing Business As), include it here as well.
- Finally, provide your business address, including street address, city, state, and ZIP code.
Note the Type of Return and Filing Period
Choose Form 941 and specify the quarter and year on the right side of the form when noting the type of return and filing period for Form 941-X. This is important because it ensures that you are correcting the correct form and filing period.
By selecting Form 941, you are indicating that you are amending your quarterly federal tax return. Make sure to accurately indicate the quarter and year that you are applying for the Employee Retention Credit (ERTC).
Additionally, note the date when you discovered the mistake or change in law that prompted you to file Form 941-X. Providing this information correctly will help ensure that your amended return is processed accurately and efficiently by the IRS.
Check the Claim Box
Now that you have noted the type of return and filing period, it’s time to move on to the next step: checking the claim box on Form 941-X. This step is crucial because it indicates that you are claiming the Employee Retention Credit (ERC) for underreported tax amounts.
Tick box number 2 in Part 1 of the form, which clearly states ‘claim’ in bold letters.
To help you navigate this step effectively, here are some key points to keep in mind:
- Box #2: Check this box to indicate that you are claiming the ERC as a refund.
- Underreported tax amounts: By checking this box, you acknowledge that your original tax liability was higher than what it should be due to the ERC.
- Importance of accuracy: Make sure to accurately check the claim box to ensure proper processing of your claim.
Complete the Certification
To successfully complete the certification on Form 941-X, you need to ensure that you understand and fulfill your responsibilities for adjusting other tax returns as needed.
Part 2 of the form requires you to certify that you will update the amount claimed as a wage expense on your income tax return and adjust your W3 forms to reflect the lower payroll taxes paid due to the Employee Retention Credit (ERTC).
Tick box 3 at the top of Part 2 to indicate your understanding of this responsibility. Additionally, tick box C under number 5 in this section if you have only claimed the employer part of Medicare or social security tax and are not making adjustments to employee withholding funds.
Enter the Numbers into Part 3
You should ensure that the numbers you enter in Part 3 of Form 941-X accurately reflect the adjustments made for the Employee Retention Tax Credit. This section of the form is where you will compare and update your original numbers with the corrected ones.
Here are some key points to keep in mind as you enter the numbers:
- Copy all original numbers from your original Form 941 into column 2.
- Enter your corrected numbers in column 1.
- Column 3 will show the difference between the new and adjusted numbers.
- Column 4 will display the tax amounts after multiplying by the tax rates for social security and Medicare taxes.
Note the Amount of the Employee Retention Tax Credit
Take note of the amount of the Employee Retention Tax Credit on line 18a and line 26a.
Line 18a is used to note the nonrefundable amount of the credit, but only for corrections related to quarters beginning after March 31, 2020, and before January 1, 2022.
On the other hand, line 26a is where you should indicate the refundable portion of this credit.
To calculate these amounts accurately, you can use Worksheet 2 provided in the instructions for Form 941-X. This worksheet will guide you through the necessary calculations using your payroll records and previously filed Form 941s.
Once you have determined the correct amounts, transfer them onto the corresponding lines on Form 941-X to complete your filing accurately.
Enter the Qualified Wages
Enter the qualified wages on Line 30 of Form 941-X, taking into account the specific period for which you are claiming the credit.
Here are some important points to consider when entering the qualified wages:
- The maximum amount of qualifying wages per employee is $10,000 for 2020 and $10,000 per quarter for 2021.
- If you amend for a specific quarter in 2020 and report $7,000 in qualifying wages for one employee, you can only claim $3,000 in qualifying wages for that employee in the next quarter.
- For 2021, you can claim all of an employee’s wages as qualifying if they earned less than $10,000 for the quarter.
- The total of the qualifying wages should be entered on Line 30 and should include all employees’ qualifying wages.
- Remember to meet all requirements to claim the credit before entering the qualified wages.
List Qualified Healthcare Expenses
To claim the Employee Retention Credit, include eligible healthcare expenses along with wages on your Form 941-X.
Qualifying healthcare expenses refer to any healthcare expenses that you have paid for your employees. These expenses can be combined with wages to reach the limits set by the credit.
For example, if you paid an employee $8,500 in wages and $1,500 in healthcare expenses for the year 2020, you can claim both amounts because they add up to the $10,000 limit.
However, if you paid $9,000 in wages and $1,500 in healthcare expenses, you can only claim $1,000 in healthcare expenses to stay under the limit.
Including these eligible healthcare expenses will ensure that you maximize your benefits from the Employee Retention Credit.
Note If You’re Making a Claim for March 2020
Now that you have learned about the qualified healthcare expenses for the Employee Retention Credit (ERC), it’s important to note if you’re making a claim for March 2020. The background information explains that you can use line 33a on Form 941-X to claim the tax credit for wages paid between March 13 and March 31, 2020.
However, it is usually more effective to file amended returns for later quarters of 2020. Most businesses are better off filing for the second quarter or combining it with the third and possibly fourth quarters. For example, if an employee earned $1,000 in qualifying wages during the first quarter and $6,000 in each subsequent quarter, you can file to report $1,000 for Q1, $6,000 for Q2, and either $3,000 for Q3 or $4,000 for Q4.
Recovery start-up businesses can also claim this credit for Q3 and Q4 of 2021 by noting their status in box 31b if they meet certain criteria.
- Use line 33a on Form 941-X to make a claim for wages paid between March 13 and March 31, 2020.
- Filing amended returns for later quarters of 2020 is usually more effective.
- Consider filing for the second quarter or combining it with the third and fourth quarters.
- Example: Report $1,000 for Q1, $6,000 for Q2, and either $3,000 (Q3) or $4,000 (Q4).
- Recovery start-up businesses can claim this credit by noting their status in box 31b.
Other Items to Consider:
Make sure to consult with your ERC Tax expert before filing Form 941-X for the Employee Retention Credit. Your payroll provider can provide guidance and assistance in accurately completing the form and ensure that you are eligible for the credit. They can also help you gather all the necessary documents and information needed to file Form 941-X.
Consulting with your ERC Tax expert and your payroll provider is crucial because they have knowledge of your specific payroll system and can help you navigate any complexities or unique circumstances related to claiming the Employee Retention Credit. They can also help you determine if there are any additional steps or requirements specific to your industry or business type.
By consulting with your ERC Tax expert, you can avoid potential errors or omissions on Form 941-X, which could delay processing time for your refund. They can review your calculations, confirm that you have claimed all eligible wages and expenses, and ensure that you have accurately calculated the nonrefundable and refundable portions of the credit.
Your ERC Tax expert may also be able to assist in monitoring the status of your refund once Form 941-X has been filed. This can provide peace of mind knowing that someone is actively tracking its progress and addressing any issues that may arise during processing.
Overall, consulting with your ERC Tax expert is an essential step in successfully filing Form 941-X for the Employee Retention Credit. Their expertise will help ensure accuracy, eligibility, and a smoother process overall.
Deadlines to File Form 941-X for the ERC
The deadlines for filing Form 941-X to claim the Employee Retention Credit are April 15, 2024 for tax year 2020 and April 15, 2025 for tax year 2021.
It is important to be aware of these deadlines in order to take advantage of the ERC and receive your refund in a timely manner.
Here are some key points to keep in mind:
- File Form 941-X as soon as possible: Filing early will help you avoid additional waiting time for your refund.
- Processing times may vary: The processing times for Form 941-X and refund checks can take four to twelve months or even longer. Be prepared for potential delays.
- Consult with a professional: Before filing Form 941-X, it is advisable to consult with an ERC Tax expert firm who can guide you through the process and ensure accuracy.
- Keep track of important documents: Retain all worksheets used to calculate the Nonrefundable and Refundable Portions of the ERC. These documents may be needed in case of further inquiries or audits.
- Seek assistance if needed: If you have specific circumstances or need further clarification, don’t hesitate to reach out for assistance.
By following these guidelines and meeting the deadlines, you can successfully file Form 941-X and claim the Employee Retention Credit.
Remember that this credit can provide significant benefits for small to medium-sized businesses affected by the COVID-19 pandemic. Check, confirm and don’t miss out if you are eligible to claim ERTC!
We would recommend using an ERC tax expert to help you work through the process. Clicking on the image below takes you to our recommended ERC tax expert. Go through the questions which are aimed at quickly finding out if you qualify for ERC or not, not everyone is eligible.
Conclusion
In conclusion, filing Form 941-X for the Employee Retention Credit (ERC) is a crucial step for employers seeking to claim refunds or retroactively claim the credit. By following the provided instructions and gathering necessary documents, you can accurately complete the form and submit it within the designated deadlines.
It is important to note that Form 7200 is no longer accepted for ERC claims, so using Form 941-X is essential. Remember to report qualified wages and health plan expenses correctly and describe any overreported amounts. We recommend that you consult with an ERC Tax expert to ensure accurate filing.
The ERC provides valuable financial relief for eligible businesses, so make sure to take advantage of this opportunity by properly filling out Form 941-X in 2020 and 2021 and claiming the credit retroactively if applicable.
