Instructions for Filing Form 941X with the ERTC

You must submit Form 941X to make an employee retention tax credit (ERTC) claim. This Form 941, Employer’s Quarterly Federal Tax Return, has been changed. Form 941X is used whenever a 941 form that has already been submitted needs to be corrected. It is not just for claiming the ERTC.

How to complete the 941X form is explained in this instruction. For companies wishing to claim the ERTC, it provides guidance on how to complete Form 941X.

Instructions for Form 941X, ERTC Claim

You should collect copies of your 941 forms, as well as the data from your payroll diary. Additionally, you ought to know if you qualify for this tax benefit. Once you’ve obtained the data, follow these instructions to complete Form 941X.

Enter Your Contact Information

Your employer identification number, business name, trade name, and address are required at the beginning of Form 941X. These facts must also be written down at the start of each page of this form. The pages of the form should be segregated during processing to ensure that your credit is applied to the proper account.

Take Note of the Return Type and Filing Deadline

Information concerning the filing period and the form you are updating are requested on the form’s right side. Form 941 is almost usually the best option. If you are based in Guam, American Soma, the Commonwealth of the Northern Mariana Islands, or the U.S. Virgin Islands, choose Form 944-SS and submit that document. Also, take note of the year and the quarter for which you are asking for the credit.

You must also include the date on which you found the error. Because you are merely filing a claim as a result of a change in the law, you do not need to specify the date the return was filed.

Verify the Claims Box

You must specify whether you underreported your taxes only or overreported them. Or, to put it another way, you should always remark if you are underreported. Because the credit lowers your tax due, this is regarded as an understatement of tax.

Finish the Certification

You must revise the amount you deducted as a wage expense on your income tax return because the ERTC lowers your annual gross wage cost. To reflect the fact that you paid fewer payroll taxes, you might also need to make changes to your W3 forms.

It only emphasizes that you are not making changes to a tax that was paid by withholding money from your employee’s paychecks. And that the only portion of Medicare or social security tax you are claiming is the employer portion.

Write Down the Employee Retention Tax Credit Amount

Keep in mind that line 18a contains the employee retention tax credit’s nonrefundable portion. Only revisions for quarters starting after March 31, 2020, but before January 1, 2022, are allowed on this line. The refundable component of this credit should be noted on line 26a.

Be Aware if You’re Filing a Claim in March 2020

Only salaries received from the second quarter of 2020 to the end of 2021 were covered by the aforementioned provisions on qualifying earnings and healthcare costs. If you want to submit a Form 941X to claim this tax credit for salaries paid between March 13 and March 31, 2020, use line 33a.

If this phrase makes sense in your circumstance, you may use it. However, it is often preferable for firms to file updated reports for one of the final quarter of 2020. For 2020, you can only apply the credit to up to $10,000 in qualified salary.

This suggests that if you update the second quarter returns or the second quarter returns along with the third and maybe the fourth quarter, you can probably reach this threshold. It is possible to submit a claim for the 18 days that this credit was valid during the first quarter of 2020. However, this normally has no effect.

Even if they didn’t experience a decline in sales or closure as a result of COVID-19, recovery start-up enterprises can still claim this credit for the third and fourth quarters of 2021. If your business is a start-up during recovery, you should state that in box 31b. If your company was established after February 15, 2020, and your annual gross receipts are less than $1 million, you fall under this category.

How to Fill Out Your ERTC Claim the Crucial Part 4 of Form 941X.

Although this section of the form doesn’t need any sophisticated mathematics, for some people it can be the most challenging. To finish this section, follow these instructions.

Provide a Justification for the Corrections

You must carefully complete box number 43, which relates to you. Keep in mind that the Employee Retention Tax Credit is the reason you are making the adjustments. Then, you should discuss your eligibility for this credit.

The tax credit’s revenue requirements for 2021 are more lenient. If your revenue decreased to 80% of what it was for the same quarter in 2019, you can still claim the credit. In case you weren’t open in 2019, you may utilize 2020 figures.

Sign the Form 941X

941X must be signed for the IRS to process it. Your phone numbers should be included as well. Preparers who are being paid must record their names, PTINs, EINs, and contact information. They must also sign this document.

To receive the credit, Form 941X must be submitted before the deadline. A sliding deadline exists for claiming the credit. Within three years of the initial return’s filing deadline, the revised form is required. After this date, you can make changes to forms, but if you want to get a refund, you must submit your paperwork within three years of the original due date.

Get Assistance With ERTC Application

Your Part Time Accountant exists to assist firms with the employee retention tax credit application process. Even tax experts may struggle to understand this credit due to its newness and complex requirements. However, you do not need to apply for this credit on your own as we can guide you through the difficulties.

You only have a short window of opportunity to apply for this previously unseen credit. Check to see whether you qualify right away, or ask us questions to start the process.